Why the Market Rally Could Use a Holiday; Tesla rebounds, 5 stocks near buy points

Dow Jones futures edged up slightly overnight, along with S&P 500 futures and Nasdaq futures, ahead of the Thanksgiving holiday.



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The equity market rally was positive for the second consecutive session. Fed officials expect slower rate hikes to come “soon,” according to the minutes of the Fed’s November meeting released Wednesday afternoon.

The Nasdaq led, buoyed by a rebound Tesla (TSLA). The major indices are all solidly up so far this holiday-shortened week. But a longer pause for the market rally could be constructive.

Investors should be cautious about adding exposure given key technical resistance and important economic reports ahead.

However, Dexcom (DXCM), UnitedHealth (UNH), Neurocrine biosciences (NBIX), Medpace Holdings (MEDP) e Medical shock wave (SWAV) are five healthcare stocks showing attractive action.

DXCM stock and Neurocrine Biosciences are on the IBD leaderboard, with MEDP stock on the leaderboard watchlist. NBIX and Medpace stocks are on the IBD 50.

Dow Jones Futures today

Dow Jones futures are up 0.1% from fair value. S&P 500 futures advanced 0.1% and Nasdaq 100 futures rose 0.15%.

US stock exchanges will be closed on Thursday for the Thanksgiving holiday. US stocks will close early Friday at 1 PM ET. But other exchanges around the world will be open on Thursday and Friday normally.

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 had some swings on Wednesday but extended gains, led by technicians.

Initial jobless claims rose to a three-month high, while continuing claims hit an eight-month high. S&P Global’s Purchasing Managers’ Indices for US manufacturing and services both signaled a decline.

The Fed minutes bolstered expectations of a 50 basis point rate hike at its Dec. 14 meeting. Markets are still in favor of another half-point move in February, but there’s a good chance of a quarter-point increase.

The Dow Jones Industrial Average was up 0.3% in the stock market on Wednesday. The S&P 500 index rose 0.6%, led by TSLA stock. The Nasdaq composite was up 1%. The small-cap Russell 2000 was up 0.1%.

US crude oil prices tumbled 3.7% to $77.94 a barrel. Natural gas futures rose 7.2%.

The yield on the 10-year Treasury fell 5 basis points to 3.71%. The yield on two-year Treasuries, more closely linked to the Fed’s rate hike prospects, fell below 4.5%.

The US dollar fell significantly for the second session in a row, returning close to recent lows.


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ETFs

The iShares Expanded Tech-Software Sector (IGV) ETF was up 1.5%. The VanEck Vector Semiconductor (SMH) ETF gained 0.9%.

The SPDR S&P Metals & Mining (XME) ETF was up 0.3%. The US Global Jets ETF (JETS) was up 0.1%. SPDR S&P Homebuilders ETF (XHB) was up 0.5%. The Energy Select SPDR ETF (XLE) fell 1.1%. The Health Care Select Sector SPDR Fund (XLV) rose 0.4%. Dow Jones’ gigantic UNH stock is first holding in XLV.

Reflecting more speculative stocks, ARK Innovation ETF (ARKK) was up 2.9% and ARK Genomics ETF (ARKG) was up 0.9%. TSLA stock is a major holding in Ark Invest ETFs

Shares of Tesla rose 7.8% to 183.20 on Wednesday, rebounding from Tuesday’s bear market lows as Citigroup upgraded the EV giant from a sell to a suspension. Shares of TSLA are still down 19.5% so far this month and have nearly halved in 2022.


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Actions to watch

Dexcom shares advanced 1.7% to 112.92, finding support at the 21-day moving average. DXCM shares were put on hold this month after posting an earnings gap on Oct. 28. Dexcom stock is likely to have a long shelf life with a 123.46 buy point from a seven-month consolidation. Investors could buy DXCM stock from an early entry outside the 21-day line, perhaps using Tuesday’s high of 113.88 as a specific buy point.

Medpace stock fell 1.3% to 218.81 on Wednesday. Shares have been consolidating near all-time highs since skyrocketing 38% on Oct. 25 on earnings. Since then, the MEDP stock has forged a messy handle on a deep, year-long foundation. While shares have had some big intraday swings, MEDP stock is currently on track to make a tight three-week pattern by Friday’s close. Investors could use the November 15 close of 226.57 as an early entry, above most recent trading.

NBIX stock fell 1.5% to 118.97. Shares are consolidating near multi-year highs, extended since October’s breakout. Despite a dip to the 50-day line last week, Neurocrine stock has a tight three-week pattern that is on track for a fourth week. Technically, this has a buy point of 126.09, although investors may want to wait for quieter action.

Shockwave stock rose 4.7% to 264.06 on Wednesday, trading back above its 21-day line but reaching resistance at the 50-day line. After a failed breakout in late October and a continued strong sell-off through earnings, SWAV stock has rebounded over the past week. A new base will take longer, but aggressive investors could use a strong move above the 50-day mark as an early entry.

UNH stock rose 1.3% to 529.71, bouncing above its 50-day and 21-day lines after briefly undercutting its 200-day line last week. UnitedHealth stock was a long-term IBD leader and still shares many characteristics. Investors could use a bounce off the 50-day line as an early entry or long-term leader entry. UNH stock needs to forge a new footing after a breakout from a cup-and-handle footing quickly failed last month.


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Analysis of market rallies

The stock market rally added to Tuesday’s gains. The S&P 500 just broke its Nov. 15 intraday high and closed within 1% of its 200-day line.

The Russell 2000 made it all the way to its 200 day line.

The Nasdaq added to Tuesday’s rebound from its 21-day moving average, although it is still below its short-term high from Nov. 15 and well below its 200-day high.

The Dow Jones is within 20 points of its August 16 intraday high.

The S&P 500 moving decisively above its 200-day line, which roughly coincides with a one-year downtrend line, is a huge test for the market to rally.

A slew of economic data could swing Fed rate expectations and thus the stock market. On Wednesday, Nov. 30, the October JOLTS report will showcase job opportunities, with Fed Chief Jerome Powell speaking later in the day. The PCE price index, the Fed’s preferred inflation gauge, will be released on Thursday, along with jobless claims and the ISM manufacturing index. The November jobs report is due on Friday 2 November.

Ideally, the market would move sideways for a few days, letting at least the 21 day line reach, heading towards those economic ratios.


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what to do now

The market rally has shown some nice gains this week, with more stocks showing buy signals in recent days. As a result, investors could have added a little more exposure.

But they may want to be wary of making significant new purchases with the S&P 500 hovering below its 200-day line and so much of the economy critical for the Fed due next week.

Also consider taking some partial profits in rapidly rising stocks. Equities made short-lived gains amid choppy uptrend and sector rotation.

However, investors should be hard at work on their investment shopping lists, looking for usable configurations and names across a variety of industries.

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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