Dow Jones futures will open on Monday afternoon, along with S&P 500 futures and Nasdaq futures, after a long Christmas weekend. Tesla Shanghai halts production while China competes Neo (NIO) introduced a new model.
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The stock market rally had another tough week, but rebounded from Thursday’s lows. Major indexes were mixed last week, but many leading stocks came under further pressure. The market rally looks shaky but not over yet.
It’s not a good time to buy stocks, especially growth names. But investors should always look for potential growth leaders for the next sustained market rally. Shift4Payments (FOUR), Celsius (CELH), impinj (PI), Enfasa Energy (ENPH) and Box (BOX) is holding up quite well in the current weak market. FOUR shares and Box are consolidating near recent highs, while Impinj, Celsius and ENPH shares are trading around the 50-day or 10-week line. Nothing is actionable now, and everything could weaken if the market continues to weaken. But watch them.
ENPH stock is on the IBD Leaderboard, with PI stock on the Leaderboard watchlist. Enphase, Shift4Payments, Box and CELH stocks are at the IBD 50. ENPH stock is also at the IBD Large Cap 20. Shift4Payments is the IBD Stock of the Day.
But growth megacaps are having a hard time, especially Apple (AAPL), Nvidia (NVDA) and Tesla (TSLA).
New Year’s Day 2022
Finally, Tesla’s Chinese rival Neo (NIO) is holding Nio Day 2022 on Saturday. It introduced the EC7 coupe SUV, a likely rival to the Tesla Model Y. Deliveries of the EC7 will begin in May 2023. Nio also introduced the revamped ES8 SUV, now on the NT 2.0 platform like its all-new model. Shipping starts in June.
Nio also announced next-generation battery swapping stations and charging options.
Nio production increased with strong demand for the newer ET5 sedan and ES7 crossover SUV. But loosening Covid regulations could trigger a huge wave of infections, and Nio and other Chinese EV makers could face further production or supply chain problems. A giant EV BYD (BYDDF) said this week that Covid cases among workers reduced production by 2,000-3,000 vehicles a day.
Nio shares fell 5.4% last week, back below the 50-day line. Shares are well below the 200-day line.
Tesla Shanghai Production Halted
Tesla Shanghai halted production on December 24, with workers expected to return on January 1, 2023. The year-end production shutdown has been widely reported in recent weeks, but denied by the EV giant. Shanghai had already slowed production earlier in the month, with inventories rising rapidly despite late October price cuts and a big end-of-year incentive.
Last week, Tesla shares fell 18% to 123.15 after plunging 16.1% the previous week. That was the worst weekly loss since the March 2020 Covid crash. TSLA shares are at a 27-month low, down 70% from the November 2021 peak.
Dow Jones Futures Today
With Christmas falling on a Sunday, US stock and bond markets will be closed on Monday, along with many exchanges around the world.
Dow Jones futures open at 6 p.m. ET on Monday, along with S&P 500 futures and Nasdaq 100 futures.
Remember that overnight action in Dow futures and elsewhere does not 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 fell sharply this week, but ended the worst week of the week.
The Dow Jones Industrial Average rose 0.9% in stock market trading last week. The S&P 500 index was down 0.2%. The Nasdaq Composite declined 1.9%. The small-cap Russell 2000 finished just above the break-even point.
Apple shares fell 2% to 131.86 last week. It tested the June bearish market low at 129.04, falling to 129.64 Friday morning.
Shares of Nvidia fell 8.2% to 152.06, following a sharp reversal below the 200-day line in the previous week, amid widespread chip selling. Shares of NVDA found support at the 50-day line on Friday.
The 10-year Treasury yield jumped 27 basis points to 3.75%. The inverse relationship between Treasury yields and stock prices has faded in recent weeks.
US crude oil futures jumped 6.9% to $79.56 a barrel this week, briefly topping $80 on Friday.
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ETFs
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) fell 0.3% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) rose 0.7%. The iShares Expanded Technology Software Sector ETF (IGV) fell 1.8%. The VanEck Vectors Semiconductor ETF (SMH) fell 4.7%, with NVDA shares being SMH’s top holding.
The SPDR S&P Metals & Mining ETF (XME) rose 1.6% last week. The Global X US Infrastructure Development ETF (PAVE) rose 0.75%. The US Global Jets ETF (JETS) fell 1.3%. SPDR S&P Homebuilders ETF (XHB) lost 1.25%. The Energy Select SPDR ETF (XLE) bounced 3.2% and the Financial Select SPDR ETF (XLF) rose 0.8%. The Health Select Sector SPDR Fund ( XLV ) jumped 0.4% higher.
Reflecting a more speculative stock story, the ARK Innovation ETF (ARKK) fell 6.9%, hitting a new five-year low on Thursday. ARK Genomics ETF (ARKG) lost 5.6% last week. Tesla shares remain the top holding across the Ark Invest ETF.
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Growth Stocks To Watch
Shares of Shift4Payments rose 4.1% to 54.06 last week. FOUR shares have seen big changes, but have tightened in the past few weeks near seven-month highs. The relative strength line is at an eight-month high, reflecting Shift4’s outperformance against the S&P 500 index. However, EMPAT stock has no clear buy points right now.
Shift4’s revenue and sales growth increased in the most recent quarter, with the company significantly expanding its target market.
CELH shares fell 1.85% to 106.79 last week, consolidating below the 21-day line and nearing the 10-week line. Celsius shares briefly topped the 118.29 cup base buy point earlier this month before retreating. But that leaves the 10-week line to catch up, while the RS line has held close to its highs. A strong bounce off the 10-week line and above the 21-day line will also break the short downtrend, offering an early entry for CELH stock.
Celsius has rapid sales growth and should see strong earnings in 2023, but the energy drink maker has caffeinated valuations.
Impinj shares rose 4 cents to 111.87, with Friday’s 2.9% decline taking it to the 50-day and 10-week line for the first time since a strong earnings gap breakout on Oct. 27. PI stock has retreated modestly for four consecutive weeks from record highs, but its RS line has barely fallen. A bullish bounce off the 50-day line would offer an initial buy point.
Impinj’s earnings have soared in 2022, with strong profits seen next year.
Enphase shares fell 3.1% to 293.95 last week, below the 50-day line. 316.97 purchase points from the cup with handle purchase point is no longer valid. The ever-volatile ENPH stock may be weeks into a new consolidation. A bullish move from the 50-day line — perhaps retaking an old buy point — could offer an aggressive entry.
Enphase’s revenue and revenue growth is accelerating, with strong growth seen in 2023 and beyond with solar incentives in place for years to come.
Box stock traded tight last week, down 0.7% to 31.01. The cloud-based data storage firm is on the edge of a buy zone from a 29.57-cup buy point with a handle, according to MarketSmith analysis, following a Dec. 12 breakout. The recent pause could be seen as holding onto an eight-month consolidation. That buy point is 31.10, but investors can look for an early entry. Ideally, the 21-day line will follow and the 50-day line will close the gap with Box stock.
Box revenue growth has accelerated for the past two quarters.
Market Assembly Analysis
The stock market rally remains under heavy pressure. Major indices were mixed for the week, not rebounding after a big, bad off week the previous week.
The Dow Jones rose modestly for the week after testing its 50-day line several times.
The S&P 500 fell modestly, but that masked some big swings this week. The benchmark index just reclaimed its 50-day moving average on Wednesday. On Thursday, the S&P 500 and other major indexes fell to their worst levels in weeks, but closed off record lows.
On Friday, the S&P 500 rose slightly, but below its 50-day line. The Invesco S&P 500 Equal Weight ETF (RSP), with a lower weighting to tech giants like Apple, rose on Friday to just reclaim its 50-day high.
The Nasdaq was the laggard, with shares of Tesla and Nvidia among the laggards. But there is widespread weakness for growth stocks, particularly among chip names following weak results and guidance from memory chipmakers Micron Technology (MU).
The S&P 500 needs to regain the 50-day line, but that’s just the first step.
It is not clear whether the market will bounce back, fall towards lows or move sideways in an unstable manner for an extended period. The latter may be more likely until there is some clarity about when and where the Fed will stop raising rates, and whether the economy will slide into an outright recession.
While growth stocks like Enphase and Celsius are worth watching, many medical stocks and other defensive growth plays are holding out. Metals and mining, industrials, housing and some energy plays performed relatively well.
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What to do now
The stock market traded higher and lower this week, with the technical picture unchanged dramatically. Apart from the Dow Jones, the major indexes are below their major moving averages. Major stocks are difficult to hold, at best.
Investors should have minimal exposure and be careful with adding new positions. Don’t get excited by a strong opening or a bullish session or two.
Keep your watchlist up to date. Many stocks from various sectors are preparing or preparing to establish. Some names show strong relative strength but lack clear buy points. That’s OK now.
In the meantime, take a moment to review your trades over the past year, including your big winners and losers, and the trades you didn’t make but wish you had. Are you following your rules, and are your rules correct?
Read The Big Picture daily to stay abreast of 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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