May 24, 2024

Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures, after Israel thwarted Iran’s Saturday drone and missile attack on Iran.




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Over 200 Iranian drones and missiles were intercepted, an Israeli military spokesman said, with the attack slightly damaging a military base.

Tehran had vowed retaliation for Israel’s April 1 strike on its consulate in Damascus, which killed a senior general. Iran told the United Nations that the matter “can be deemed concluded.” The well-telegraphed attack appears to have been an effort to show a forceful response while minimizing the risk of much-wider escalation.

President Biden said he’ll seek a “diplomatic response” to the crisis.

How will Dow futures respond? Bitcoin plunged Saturday, falling from about $67,000 to a low of $60,908. It’s now back to around $64,000. The Bitcoin price tumbled 5.1% to $66,870.29 on Friday.

The stock market rally sold off Friday on fears of an Iran attack. The Nasdaq fell even after setting a record close Thursday as Nvidia (NVDA) and other megacap and AI stocks rebounded. The S&P 500, Dow Jones and Russell 2000 suffered larger weekly losses.

The CBOE Volatility index, the market fear gauge, spiked Friday to its highest levels since late October on Iran concerns.

Investors need to recognize Friday’s market expectations breaker and respond accordingly.


Nvidia Leads 5 Stocks Near Buy Points


Dow Jones Futures Today

Dow Jones futures open at 6 p.m. ET, along with S&P 500 futures and Nasdaq 100 futures.

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

Other News

Late Friday, Tesla (TSLA) cut the price of Full Self-Driving subscriptions to $99 a month from $199. Tesla has halted Cybertruck deliveries, according to online chatter over the weekend.

Salesforce.com (CRM) is is in late-stage talks to buy data-management software maker Informatica (INFA), The Wall Street Journal reported Friday night.

Key Earnings Ahead

Goldman Sachs (GS) and Charles Schwab (SCHW) report early Monday. Goldman stock fell below its 50-day line on Friday, while Schwab is holding in a buy zone.

Chip-equipment giant ASML (ASML) and Nvidia chipmaker Taiwan Semiconductor (TSM) may be the  week’s two most important earnings. Their results and guidance have big implications for the chip sector, including Nvidia, Broadcom (AVGO), Lam Research (LRCX), Applied Materials (AMAT) and KLA Corp. (KLAC).

All of these chip stocks have new bases or potential entries.

Nvidia stock is on IBD Leaderboard, SwingTrader and the IBD 50. KLA stock is on the IBD Long-Term Leaders list. Nvidia, ASML and Broadcom stock are on the IBD Big Cap 20.


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Stock Market Rally

The stock market rally had a tough week on a hot CPI inflation report and Mideast fears, with Friday’s losses wiping out Thursday’s bullish signals.

The Nasdaq, which hit a record close Thursday, fell 1.6% in Friday’s stock market trading to end the week with a 0.45% loss. The composite finished below the 21-day line but just above the 50-day and 10-week lines. It’s also still trading with the big April 4 reversal day.

The S&P 500 index sank 1.55% for the week, below the 21-day. The benchmark index closed just above its 50-day line but below its 10-week.

The Dow Jones Industrial Average slumped 2.4% to the lowest level since late January while the small-cap Russell 2000 shed 2.9% to the lowest since late February. Both are clearly below the 50-day.

The Invesco S&P 500 Equal Weight ETF (RSP) fell 2.6%, knifing through the 50-day line Friday. The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) slumped 1.7%, below the 50-day line to its worst levels since late February.

Crude oil fell 1.4% to $85.66 a barrel for the week, backing off Friday’s intraday high of $87.67. Gold climbed 1.3% to $2,356.20 an ounce, also well off Friday highs.

The 10-year Treasury yield leapt 12 basis points to 4.5%, with Thursday’s peak of 4.59% a five-month high. Investors only see a modest chance of a Fed rate cut in June and are only leaning toward a move in July.

Stock Market Fear Gauge Soars

The CBOE Volatility index shot up 16.1% on Friday, hitting its highest levels since late October. Excessive fear could foreshadow at least a short-term bottom. But the market fear gauge is still well off its October peaks, let alone its Covid highs.

Another sentiment gauge, notably the bulls vs. bears reading, had been near excessive bullish levels heading into this past week.

If Mideast tensions ease, there could be a snapback rally in stocks. Various indicators suggesting the market is getting oversold also bolsters that hopeful case.

But an escalating Iran-Israel conflict could trigger a far-larger fear spike and a big retreat from equities.

ETFs

Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) fell 1.7% for the week. The VanEck Vectors Semiconductor ETF (SMH) slipped 0.9%. Nvidia and Taiwan Semiconductor are the largest SMH holdings, with ASML, Lam Research, KLA and AMAT stock also members.


Time The Market With IBD’s ETF Market Strategy


ASML, Taiwan Semi Earnings

Dutch chip-equipment giant ASML reports Wednesday morning and Taiwan Semiconductor is due early Thursday.

Analysts expect ASML earnings to tumble in Q1, but see a recovery in the second half. Taiwan Semi earnings are expected to be flat, though unofficial targets may be higher after the foundry giant reported better-than-expected Q1 sales on April 10.

Taiwan Semi is benefitting from strong demand for AI and other advanced chips. TSMC’s guidance on earnings and capital spending will be key for the industry.

ASML stock fell 1.8% to 961.84 last week, right around the 50-day and 10-week lines. It now has a flat base with a 1,056.34 buy point. Investors could use a trendline entry around 1000 to start a position off the 10-week, or the April 1 high of 1002.66.

TSM stock rose 0.85% to 142.56 for the week. Shares have been consolidating for a few weeks, but need another week for a proper base. Investors could use the April 10 high of 148.43 as an entry if Taiwan Semi stock rallies on earnings.

Chip Stocks

Nvidia stock edged up 0.2% to 881.86 for the week. Shares rebounded from the 10-week line on Wednesday-Thursday before retreating Friday, still holding the 21-day. NVDA stock now has a flat base with a 974 buy point. Investors could use Thursday’s high of 907.39 as an early entry.

Broadcom stock edged up 0.35% to 1,344.07 for the week, finding support at the 21-day and 10-week lines amid continued tight closes but hitting resistance near the 1,400 level. AVGO stock now has a consolidation, with the April 4 high of 1,403.98 serving as a handle buy point.

Lam Research stock fell 1.2% to 957.04 for the week, finding support at the 10-week line. Shares have a 1,007.39 flat-base buy point, according to MarketSurge. Lam has its own earnings due on April 24.

Applied Materials stock was flat at 207.86 for the week, trading tightly around the 21-day line. Investors could treat the recent consolidation as de facto flat base with a 214.91 buy point. A three-weeks-tight pattern gives a slightly lower entry of 213.33 based on the April 11 high.

KLAC stock dipped 0.3% to 680.78, right around the 50-day and 10-week lines. KLA has a 729.15 flat-base buy point. A decisive move from the 50-day line could offer an early entry. KLA earnings are due April 25.

What To Do Now

After Thursday’s strong action, the expectation was that the market would continue to rise, especially the Nasdaq and leaders such as Nvidia.

Instead there was a big retreat Friday in anticipation of an Iran strike vs. Israel. While Treasury yields fell Friday, the weekly surge — and pushing Fed rate cuts further back — is a broader headwind.

Whatever the reason, this is still a sideways market for the Nasdaq, and those are tough to handle. For the Dow and Russell 2000 — and perhaps the S&P 500 — it’s looking more and more like a pullback or emerging correction.

Investors have to reassess after Friday and the past week. If you took new positions on Wednesday-Thursday, you may need to cut them back or exit entirely.

It’s still a time to be working on watchlists. If the drumbeat of war fades and upcoming earnings reactions are positive, you’ll want to be ready. But you also have to be prepared to scale out more aggressively.

With earnings season kicking in, know when your holdings report, as well as when key rivals, customers and suppliers are on tap.

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

Please follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.

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Source: investors.com

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