Stocks rallied on Friday after falling towards key support. Apple (AAPL), Tesla and bank stocks led the charge. The Nasdaq could be close to re-hitting 2023 highs. We've been there before. Dow Jones futures, S&P 500 and Nasdaq Futures will open on Sunday evening.
Warren Buffett’s Berkshire Hathaway reported earnings on Saturday.
The buying opportunities are still limited. Dow Jones giant Visa, Advanced Micro Devices and TJX Cos. are all hovering near entries. Visa is in the buy zone but could also have other entries. AMD stock is about to make an entry, thanks to the Microsoft (MSFT), AI buzz. TJX is also a good investment.
Tesla is still a long way from being a good buy, but it's worth watching.
Despite a huge rebound Friday, PacWest Bancorp and other regional bank had a terrible week. Keep an eye on PACW, Western Alliance Bancorp and regional banks.
Investors should be cautious when adding exposure to the market until it shows greater strength and breadth. But it could happen soon.
Microsoft is a long-term leader on IBD's Long-Term Leaders.
DraftKings, Visa and TJX stocks.
Berkshire Hathaway Earnings
Berkshire Hathaway is scheduled to report its first-quarter earnings this Saturday.
Buffett's Berkshire conglomerate will also reveal net equity purchases and sales as well as Berkshire stocks buybacks.
Apple stock is Buffett's single largest holding. Berkshire also increased its stakes in Occidental Petroleum over the last year.
Apple's stock reached an all-time high on Friday, after exceeding earnings expectations. OXY has struggled for the last six months due to low oil prices. Occidental's earnings will be released on Tuesday.
BRKB is currently at a 331.94 buying point for a cup with handle base that has been in place for 13 months. The stock has also been paused just above the bottoming base.
Dow Jones Futures
Dow Jones futures will open at 6 pm ET on Sunday, along with S&P 500 and Nasdaq 100 futures. S&P 500 and Nasdaq futures will open at 6 p.m. ET on Sunday.
Keep in mind the overnight Dow Futures session.
Stock Market Rally
Stocks retreated throughout the week but recovered on Friday, closing in a mixed range.
Last week, the Dow Jones Industrial Average fell 1.2%. S&P 500 fell 0.8%. The Nasdaq composite managed a tiny 0.1% increase. Russell 2000, a small-cap index, fell by 0.4%.
In the midst of some major daily movements, the 10-year Treasury yield fell a fraction for the week to 3.445%.
Even with the slight increase of 4% on Friday, U.S. crude futures fell 7.1% this week to $71.34 per barrel.
Innovator IBD's 50 ETF (FFTY), which tracks growth ETFs fell 0.3%, while Innovator IBD's Breakout Opportunities (BOUT) dropped 1.2%. The iShares Expanded Tech Software Sector ETF (IGV), a growth ETF, declined by 1.1%. IGV is heavily reliant on MSFT. VanEck Vectors Semiconductor ETF SMH gained 0.6%. SMH holds a large amount of AMD stock.
ARK Innovation ETF jumped 4.1% and ARK Genomics ETF climbed 2.6% last week, reflecting the more speculative story stock. Tesla is the top holding across Ark Invest's ETFs. Ark Invest ETFs hold the largest amount of Tesla stock. TSLA's stock jumped by 5.5% Friday, barely below the 21-day average. To start approaching potential buy points, it still needs to retake the 50-day line. BYD, Tesla's arch-rival and rival BYDDF (BYDDF), is also setting up shop near a good buy point. Cathie Wood's Ark has a small holding in BYD.
Last week, SPDR S&P Metals & Mining ETF XME (XME), fell by 1.9%. Global Jets (JETS) fell 0.7%. SPDR S&P Homebuilders ETF XHB slid down by 0.2%. Energy Select SPDR (XLE) fell 5.8%. The Health Care Select Sector SPDR Fund XLV was barely above break-even.
Financial Select SPDR ETF XLF declined 2.5% during the week but rose 2.4% on Friday. XLF is largely composed of banking giants. Berkshire Hathaway, however, is its largest holding. Visa stocks are also a significant component.
The SPDR S&P Regional Banking ETF KRE rallied by 6.3% on the Friday, but fell 10.1% overall for the week. KRE reached a new low of 31 months on Thursday. PacWest's stock rose 82% Friday but fell 43% overall for the week. WAL's stock soared 49% on Friday but fell 27% in the following week.
Stocks near Buy Points
Visa's stock rebounded from its 50-day level on Friday to retake the 227.51 double bottom buy point. The shares fell just 0.4% this week, to 231.78, continuing the tight movement. V stock is in a tight pattern for four weeks with an entry of 235.67. Visa and its rival Mastercard (MA), which will benefit from the strong growth of cross-border payments, are expected to have solid earnings for the next two year. MA is also in a range of stocks to buy.
The AMD stock rose 0.5% this week to 89.84 despite big swings. Shares fell Wednesday due to AMD's weak guidance. They then surged Thursday after a report that the company is collaborating with Microsoft on an AI processor. Microsoft denied later that it was developing its own AI chip, but did not say if AMD's efforts were funded. The shares continued to rise on Friday, closing above the 50 day line. If the shares move above Thursday's high, 91.64, it would be a definitive move above both the 50-day and downward-sloping line.
Microsoft's stock rose by 1.1% this week, reaching a new 52-week high.
TJX's stock fell 0.4% last week to 78.50, but continued to find support on the 50-day line. Investors could enter at 79.81, which is just above the official buy point of 83.23. This is just above the handle, which is a fraction too low. This "handle" is also a three weeks-tight entry with the same 79.81.
Market Rally Analysis
Stocks closed with a narrowly mixed result, despite some notable changes during the week.
Apple, Tesla, and the April job report were the main reasons for the strong bounce back Friday. The gains on Friday were made with lower volumes.
The Nasdaq briefly reached a three-month peak on Friday, but it was still below the 2023 highs. The major indexes, however, have been threatening this for weeks.
The Nasdaq A/D and NYSE A/D lines have both been deteriorating.
First Trust Nasdaq 100 Equal Weighted Index ETF QQEW did rise above its 21-day and 50-day lines on Friday, reducing its weekly loss to only 0.35%. Invesco's S&P Equal Weight ETF fell by 1.45% this week. However, it bounced back Friday and is now just above its 200-day line.
The market has been dominated by a small number of stocks, and there are few opportunities to buy. The majority of the Friday's biggest movers were below their 200-day line.
The banks remain the biggest wild card. As Friday's results showed, if the regional banking crisis is resolved and bank stocks begin to recover, this would provide a major boost to the market. The risk of another waterfall sell-off is likely to remain for some time.
The markets also rose on Friday, despite a strong jobs report which could have hurt stocks a few short days ago. Investors are now more concerned about recession risk, as the Fed appears to be on hold. Will this continue forever, or was it just a blip in the market?
If the major indexes are able to break decisively higher - with breadth - the market rally may have more room.
What to Do Now
The rally in the market remains weak, as the indexes are rangebound, and market conditions are generally weak.
Few stocks have performed consistently. Recent buying opportunities are few, and many come from large earnings gaps. These are particularly risky when the market is uneven. Stocks that are advancing end up reversing their gains.
If Nasdaq leads the indexes to 2023 highs then more stocks will continue to rise and make bullish movements that are closer to the buy points. Investors may gradually increase their exposure.
Investors need to be prepared. After earnings, some stocks that were promising have been greatly extended while others have fallen sharply. Sectors are not clear.
Be prepared for the worst. The market may have ended Friday on a positive note, but it didn't really make any progress. If the market or stocks break down, it would be a good sign to get out.
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