Market Rally: S&P 500 breaches key level as 5 stocks flash buy signals

Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures. The stock market rally rebounded on Tuesday, with the S&P 500 regaining the 4,000 level.



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Deere (DE) reports earnings early Wednesday, with DE shares in a buy zone. Deere’s earnings and leadership could matter to a variety of agricultural stocks, including CF Industries (CF) e Archer Daniels Midland (ADM), as well as machinery manufacturers such as caterpillar (CAT).

Energy stocks continue to do well. Solar leader Energy in phase (ENPH), coal producer Peabody Energy (BTU), refiner CVR energy (CVI), producer of natural gas EQT Corp. (EQT) and LNG inventories Excel Energy (EE) are all nearby purchase points.

EE stock broke out on Wednesday, with Enphase falling back into a buy zone. BTU, CVR Energy and EQT actions are actionable.

ENPH shares are in the IBD ranking. EQT shares are on SwingTrader. Deere stock is on the IBD 50. Peabody Energy is Tuesday’s IBD Stock of the Day.

Dow Jones Futures today

Dow Jones futures are up from fair value. S&P 500 futures were flat. Nasdaq 100 futures are down.

Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session of the stock market.


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Stock market rebound

The stock market rally opened mixed Tuesday but gained flow for large-scale gains, closing near the session highs.

The Dow Jones Industrial Average was up 1.2% in stock trading on Tuesday. The S&P 500 index and the Nasdaq Composite both rose nearly 1.4%. The small-cap Russell 2000 was up 1.1%.

The yield on the 10-year Treasury fell 7 basis points to 3.76%. But the yield on two-year Treasuries, more closely tied to Fed policy, remained roughly unchanged at 4.53%.

The dollar, after the rally of the previous three sessions, fell on Wednesday. The greenback has declined significantly since the end of September, especially since the beginning of November.

US crude prices rose 1.1% to $80.95 a barrel, continuing their rebound after a brief dip on Monday. Gasoline futures climbed 4.3%, good news for refineries. Natural gas futures edged higher after dropping more than 2% intraday.

ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) jumped 3.4%, helped by a number of energy and metals stocks. The iShares Expanded Tech-Software Sector (IGV) ETF was up 1.8%. The VanEck Vector Semiconductor (SMH) ETF was up 2.9%.

SPDR S&P Metals & Mining ETF (XME) gained 3.2% and Global X US Infrastructure Development ETF (PAVE) gained 1.3%. SPDR S&P Homebuilders ETF (XHB) rebounded 1.9%. The Energy Select SPDR ETF (XLE) was up 3.1%. The Health Care Select Sector SPDR Fund (XLV) rose 0.9% to a seven-month high.

Reflecting stocks with more speculative histories, ARK Innovation (ARKK) eked out a 0.3% gain and ARK Genomics (ARKG) lost 0.4%.


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Energy stocks close to purchase points

Enphase shares rose 4% to 320.44, closing above a buy point of 316.97 cups with a handle for the first time. However, the last three times ENPH stock has rallied in these areas, it has reversed to the downside. Enphase stock tends to have large daily swings. Then investors may be looking to see if ENPH stock returns to its rapidly rising 21-day moving average.

Some other LNG stocks are showing strength, con Flexible LNG (FLNG) burst and Chenière energy (LNG) reclaiming its 50-day line.

BTU shares jumped 6.7% to 29.62, just below a 30.15 handle buy point in a seven-month consolidation. Tuesday’s move broke the trend line handle, offering an early entry. However, BTU stock is 9.3% above its 21-day line and 17% above its 50-day line. The handle was formed after strong gains by Peabody Energy.

CVR Energy stock rose 4.85% to 40.85, trading back above an old buy point of 39.81 that could still be considered valid. Also, CVI stock has a tight three-week pattern with an entry of 42.31. Breaking above 41.31 could offer an early entry into that narrow pattern.

EQT stock jumped nearly 6% to 43.79, breaching the 50-day line again after rebounding from Monday’s 200-day high. Stocks are breaking a downward sloping trendline. The official buy point is 52.07.

Shares of EE rose 9.6% to 30, surpassing a buy point of 28.49 cups with a handle in above-average volume, according to analysis by MarketSmith. That move to a record close erased a lot of trading that took place going back to Excelerate Energy’s April IPO. EE shares had posted early earnings on Friday and Monday, although trading was below normal those days. Excelerate is now slightly extended from the buy zone and well extended from the 21 day line.

Analysis of market rallies

The stock market rally continues to show constructive action, trading in a tight range after a modest pullback and support last week. On Tuesday, the major indexes recovered from Monday’s losses.

The S&P 500 has bounced off its 10-day line, right at the 4,000 level, as it moves towards its 200-day line. While falling short of the intraday high of Nov. 15, it was the index’s best close in more than two months.

The 50 day line is As soon as starting to turn higher on the S&P 500.

The Russell 2000 is getting very close to its 200 days. The S&P MidCap 400, which held its 200-day line last week, posted further gains.

The main Dow broke through the 34,000 level for the first time in three months, just below its August 16 peak. The laggard Nasdaq found support at its 21-day line, just above its 50-day line, but it hasn’t recouped all of Monday’s losses.

All of these indices are working on the handles, with the Dow sneaking in on top. Most of the stocks track the action of the major indexes, so a lot of handles are forming on the stocks near the buy points. A slightly longer pause, perhaps until key economic reports late next week, would allow the moving averages to start catching up.


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what to do now

Until the S&P 500 moves decisively above its 200-day line, investors may not want to add much exposure right now. With the Thanksgiving holiday muting trading and critical economic data from the Fed next week, the market’s rally may be limited in the near term.

This could help stocks across a variety of sectors establish handles and make moving averages gain traction. Investors should build their watch lists. It’s definitely time to look beyond traditional tech growth stocks, which are mostly lagging behind right now.

Given that many leaders are extended by moving averages, such as Excelerate Energy or BTU stock, it’s all the more important to seek early revenue and act quickly.

Read The Big Picture daily to stay abreast of market direction and major stocks and sectors.

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

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