Dow Jones Futures: Market Rally Ailing, But These Stocks Are Healthy; Tesla Forges New Entry

Dow Jones futures fell modestly Sunday night, along with S&P 500 futures and Nasdaq futures. The major indexes and leading stocks had a negative week as a hawkish Federal Reserve and surging Treasury yields took their toll. The stock market rally is “under pressure.”

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Tesla stock had an outside, negative reversal week. But it now has a handle on a weekly chart after running up sharply. Meanwhile, Apple (AAPL) drifted lower, providing a little more heft to its handle while still trading tightly. While Tesla (TSLA) and Apple stock are doing relatively well, most growth stocks are not.

In healthier parts of the market, Callon Petroleum (CPE) is trading tightly on a weekly chart despite its “porcupine” reputation. General Dynamics (GD) also is trading tightly as it forges a new flat base. Molina Health (MOH) has been trading tightly in a buy zone, while also finding key support this past week.

Investors should be cautious about making new buys in the current market week.

Tesla stock is on IBD Leaderboard. Tesla and CPE stock are on the IBD 50.

The video embedded in this article discussed the mixed market action and analyzed Callon Petroleum, General Dynamics and MOH stock.

Dow Jones Futures Today

Dow Jones futures lost 0.15% vs. fair value. S&P 500 futures sank 0.2%. Nasdaq 100 futures retreated 0.25%.

U.S. crude oil futures fell 2%.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live

Stock Market Rally

The stock market rally retreated last week as the Nasdaq and small-cap Russell 2000 fell below their 50-day moving averages.

The Dow Jones Industrial Average dipped 0.3% in last week’s stock market trading, despite modest gains late in the week. The S&P 500 index fell 1.3%. The Nasdaq composite tumbled 3.9%. The Russell 2000 tumbled 4.6%.

The 10-year Treasury yield vaulted 34 basis points last week to 2.71%, hitting a three-year high, as the Federal Reserve signaled it will soon begin cutting its massive balance sheet in addition to sharp rate hikes. The Treasury yield curve is no longer inverted, as the two-year rose slightly to 2.52%.

U.S. crude oil futures fell 1.2% last week to $98.26 a barrel.

ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) tumbled 6.15% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) gave up nearly 2%.  The iShares Expanded Tech-Software Sector ETF (IGV) retreated 4.3%. The VanEck Vectors Semiconductor ETF (SMH) plunged 7%.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) dived 10.1% last week and ARK Genomics ETF (ARKG) 9%. Tesla stock is the No. 1 holding across Ark Invest’s ETFs.

SPDR S&P Metals & Mining ETF (XME) fell 1.7% last week. The Global X U.S. Infrastructure Development ETF (PAVE) retreated 3.8%. U.S. Global Jets ETF (JETS) descended 7.3%. SPDR S&P Homebuilders ETF (XHB) fell 3.5%, extending a losing streak. The Energy Select SPDR ETF (XLE) rose 3.2% and the Financial Select SPDR ETF (XLF) dipped 0.9%. The Health Care Select Sector SPDR Fund (XLV) popped 3.7%.

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Apple Stock

Apple stock fell 2.5% to 169.98 last week, closing just below its 21-day line and slightly above its 50-day and 10-week averages. That provides a little more depth to its handle buy point of 179.71. The relative strength line fell slightly, but is still close to record highs. Reports of weaker consumer electronics demand has taken a toll on chipmakers, including iPhone suppliers, but Apple stock itself has fared better. App Store and other service revenue helps insulate the tech titan from hardware demand shifts.

Tesla Stock

Tesla stock jumped Monday on record Q1 deliveries and hit a three-month high of 1,152.87 on Tuesday, essentially hitting resistance at a trendline entry. TSLA stock then reversed lower Tuesday and ended up falling 5.4% to 1,025.82 for the week, with the high and low far exceeding the prior week’s range low. Outside negative reversals are bearish action, but could be positive for the Tesla stock chart, by offering a real pullback following a huge run in just a few weeks. On a weekly chart, Tesla stock now has a cup-with-handle buy point of 1,152.97, according to MarketSmith analysis. That handle needs one more day to appear on a daily chart.

Arguably, Tesla stock could use a slightly deeper, longer handle. Getting below the 21-day moving average and 1,000 level might shake out a few more weak holders. More time would also let the 10-week line catch up somewhat to TSLA stock.

Keep in mind that Tesla stock is an outlier. Very few stocks with a triple-digit price-to-earnings ratios are holding up well. Can Tesla continue to buck the trend, or was last week’s reversal the start of a larger sell-off? When you consider that latter scenario as a possibility, you can see how a sub-1,000 move might shake a number of investors out.

On the news front, Tesla Austin held a “Cyber Rodeo” Thursday night as Model Y deliveries got underway. Tesla Berlin began limited deliveries in March. The factories should eventually give a huge boost to Tesla production capacity, but output will likely scale up slowly.

Meanwhile, the Tesla Shanghai factory has been closed since March 28, due to the city’s lockdown amid soaring Covid cases there. It’s unclear when the plant could reopen. Even if the site is allowed to reopen, the Covid outbreak and restrictions could affect suppliers.

On Monday, the China Association of Automobile Manufacturers will release industry data for March EV and overall auto sales. That’ll include Tesla wholesale sales. That will show little impact from the Shanghai lockdown.

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Callon Stock

The CPE stock chart has a well-deserved reputation as a “porcupine,” with lots of morning spikes that fade or turn negative. Callon stock also hasn’t had a big run like many other energy plays. But there are some positive signals. Shares have moved from finding support at their 200-day line to their 50-day line and now their 21-day line.

Meanwhile, despite big intraday swings, CPE stock dipped 0.8% last week to 61.94. It has now formed a three-weeks-tight, offering a 66.48 entry. That tight pattern is almost entirely within a five-month consolidation, so investors could still use 65.55 as the operative buy point.

A slew of other energy stocks is setting up or in buy zones, including integrated giants Exxon Mobil (XOM) and Shell (SHEL).

General Dynamics Stock

General Dynamics stock has been consolidating again after breaking out with other defense contractors as Russia’s Ukraine invasion began in late February. Shares now have a flat base on a weekly chart with a 255.09 buy point. GD stock also has forged a three-weeks-tight within that flat base. Investors could use that tight entry of 246.23, just above Friday’s high, as an early buy point above the bulk of General Dynamics stock’s recent trading.

Raytheon Technologies (RTX) also has a flat base, while Lockheed Martin (LMT) and Northrop Grumman (NOC) are consolidating bullishly.

Molina Health Stock

Molina stock tested its 10-week line last week, then rebounded to close down 0.6% to 337.82. MOH stock now a four-weeks-tight, offering a 347.72 buy point. That tight pattern has formed almost entirely within the buy zone of a prior cup-with-handle base. Investors could use the tight entry as an add-on buy or to start a new position.

Health insurance giants UnitedHealth (UNH) and Anthem (ANTM) are extended from buy zones, With UnitedHealth earnings due this coming week.

Market Rally Analysis

The stock market rally took a generally negative turn this past week, with growth, small caps and midcaps selling off. The uptrend has been “under pressure” since Wednesday.

The Dow Jones fell slightly for the week, holding support at its 50-day line, just below its 200-day line. The S&P 500 index fell just below its 200-day line but held above its 50-day. The Nasdaq composite fell sharply, closing the week below its 50-day line, joining the Russell 2000 and S&P MidCap 400.

Just two weeks ago, the market rally was looking broad-based, with strength across many sectors and with advancers easily beating declines. But the rally is starting to look narrow and bifurcated, returning to 2021’s difficult environment.

Energy and other commodity stocks continue to lead, along with medicals, discounters and defense firms, while REITs and insurers are holding up well. But growth, retail, housing, travel and traditional banks are struggling.

That’s not surprising, with rising rates weighing on growth stocks and housing plays, while hot inflation is starting to weigh on discretionary spending.

This coming week, the Labor Department will release the consumer price index and producer price index. Inflation is going to run hot, but markets could cheer any signs that price gains are leveling off. The latest retail sales report will indicate if shoppers are pinching their pennies amid high inflation.

Late next week, China will release first-quarter GDP data and March reports on retail sales and industrial production. But that won’t give much insight into the impact of Shanghai’s sweeping Covid lockdown, which began on March 28.

Earnings season will begin to pick up steam, with UnitedHealth due April 14 and Tesla on April 20. That could be a catalyst for individual stocks or sectors or the broad market, up or down.

So while the market rally is at an inflection point, it may not break decisively higher or lower for some time.

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What To Do Now

Split rallies are tricky. Even if you only play the strong sectors, the market can quickly rotate away from them quickly, or weakness becomes broad-based. So avoid getting too concentrated in a particular sector, while keeping your overall exposure modest.

With market conditions shaky and the outlook in flux, investors should stay engaged and ready to act. Resist the temptation to make a bunch of new buys. Focus on building up your watchlists to spot the leaders in the next sustained market uptrend.

Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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