Dow Jones Futures Rise As Market Rally Takes Big Step; Microsoft Hits $2 Trillion, Bitcoin Rebounds
By ED CARSON
Dow Jones futures rose slightly Wednesday morning, along with S&P 500 futures and Nasdaq futures. The Nasdaq hit a record high, leading a solid stock market rally Tuesday, getting a boost from Federal Reserve chief Jerome Powell.
Meanwhile, Bitcoin rebounded strongly after plunging Tuesday to a 2021 low in a key test.
Microsoft (MSFT) cleared a buy point to a record high, on the cusp of joining Apple (AAPL) with a $2 trillion market cap. Upwork (UPWK) broke out in strong volume. ServiceNow (NOW), Twilio (TWLO) and American Eagle Outfitters (AEO) offered various early entries.
Microsoft and ServiceNow stock are on IBD Leaderboard and IBD Long-Term Leaders. UPWK stock and American Eagle were added to SwingTrader on Tuesday.
Fed Chief Powell
Fed chief Powell gave a rather dovish stance on monetary policy before Congress on Tuesday. He expects a lot of economic improvement in the coming months while recent inflation spikes should be short-lived.
Fed chief Powell largely echoed his comments following the latest Fed meeting on June 16, but it served as a counterpoint to Friday’s quasi-hawkish comments from St. Louis Fed President James Bullard on Friday.
Powell’s comments turned a mixed market rally in mid-afternoon trading into a solid session by the close.
The 10-year Treasury yield edged lower on Tuesday, but so did the two-year yield.
Dow Jones Futures Today
Dow Jones futures climbed 0.2% vs. fair value. S&P 500 futures were above break-even. Nasdaq 100 futures edged higher.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Stock Market Rally Tuesday
The stock market rally rose modestly, closing near the day’s best levels after Fed chief Powell spoke.
The Dow Jones Industrial Average edged up 0.2% in Tuesday’s stock market trading. The S&P 500 index gained 0.5%. The Nasdaq composite rose 0.8%. The Russell 2000 climbed 0.4%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) popped nearly 1%, while the Innovator IBD Breakout Opportunities ETF (BOUT) advanced 0.5%. The iShares Expanded Tech-Software Sector ETF (IGV) rallied 1.1%. MSFT stock is a major IGV holding. The VanEck Vectors Semiconductor ETF (SMH) increased 0.65%.
SPDR S&P Metals & Mining ETF (XME) rose 0.6% and Global X U.S. Infrastructure Development ETF (PAVE) inched up 0.2%. U.S. Global Jets ETF (JETS) slid 0.9%, as concerns about the Delta variant of the coronavirus weighed on travel-related names. SPDR S&P Homebuilders ETF (XHB) advanced 0.4%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) rose 1.3% and ARK Genomics ETF (ARKG) 0.3%.
The Bitcoin price plunged as low as $28,814.75 Tuesday morning, cracking the $30,000 level for the first time in 2021. But it rebounded to nearly $34,000 early Wednesday.
Bitcoin has fallen sharply since nearly hitting $41,000 on June 15, right at the top of a recent range.
The latest China crackdowns on cryptocurrency transactions and mining helped spur the heavy selling over the past several days in Bitcoin and rival digital assets such as Ethereum and Dogecoin.
Bitcoin peaked at $64,829.14 in mid-April.
Microsoft Stock At $2 Trillion
Microsoft stock rose 1.1% to 265.51, nudging past a 263.29 buy point from a shallow cup base, part of a base-on-base formation. At 4.4% above its 10-week line, investors could still buy MSFT stock as a Long-Term Leader. Buying Long-Term Leaders near their 50-day or 10-week lines is often a smart strategy.
The relative strength line for Microsoft stock is at consolidation highs, and close to its best levels of 2021. The RS line has been moving sideways since last July, but that follows a long ascent, reflecting MSFT stock’s outperformance vs. the S&P 500 index.
Microsoft stock now has a market capitalization of $1.9997 trillion after edging past $2 trillion intraday. The only member of the $2 trillion club is Apple, currently at $2.24 trillion.
Apple stock climbed 1.3% to 133.98%, closing in on its own cup-base buy point of 137.17. That base is next to a failed cup-with-handle pattern. The RS line for AAPL stock is showing some signs of life. But it’s below its mid-April peak and still significantly below its late January high and last September’s record levels.
Upwork stock leapt 11% to 54.41, clearing a 51.97 double-bottom buy point. UPWK stock had met resistance just below 52 on three occasions in its base, including earlier this month. Shares also cleared a handle Tuesday that was slightly too low in the base to be proper.
The RS line for Upwork stock hit a three-month high, above its mid-April peak.
Upwork’s online platform connects freelancers with businesses, letting them collaborate remotely.
UPWK stock was Tuesday’s IBD Stock Of The Day.
ServiceNow stock rose 2.1% to 546.03, just clearing a downward-sloping trend line from the early February peak. That offers an aggressive early entry for NOW stock, perhaps a place to start a position. The official buy point for ServiceNow stock is 565.39 from a double-bottom base, according to MarketSmith analysis.
While NOW stock is a Long-Term Leader, it’s not ideal to buy it as a Long-Term Leader right now, with shares 9.5% above their 10-week line.
TWLO stock popped nearly 4% to 377.53, also moving above a trend line from its February all-time high. That provides a place to start a position. Twilio stock has a 405.90 double-bottom buy point.
American Eagle Stock
American Eagle stock rallied 4.3% to 35.91, rebounding from its 50-day line and clearing a short downtrend. That’s offering an early entry in a consolidation with a 38.38 buy point. The RS line is not far from highs.
AEO stock has been on a big run over the past year, along with many other apparel retail stocks.
Market Rally Analysis
After last week’s unnerving whipsaw action following the latest Fed meeting, the stock market rally has bounced back. The market rally enjoyed modest-to-solid gains Tuesday after Monday’s solid bounce. The Nasdaq composite hit a record high, clearing the April 19 peak and a consolidation that’s been going back to mid-February.
The S&P 500, which reclaimed its 50-day line Monday, is a fraction below all-time levels. The Dow Jones is still slightly below its 50-day line but not that far from its early May high.
When Apple and Microsoft, the two most-valuable companies and members of the Dow Jones, S&P 500 and Nasdaq composite, both rise more than 1%, it’s generally going to be a solid day for the major indexes.
But it was more than just a handful of tech megacaps moving. The small-cap Russell 2000 rose modestly intraday after finding support at its 50-day line. Sector and growth ETFs also pointed to a broad advance Tuesday.
From a practical standpoint, a few more stocks cleared buy points or early entries, including Microsoft and ServiceNow. While software, medicals and some recent IPOs are leading the charge, apparel retailers like American Eagle stock are looking strong. There are also a number of stocks closing in on buy points from a variety of sectors.
What To Do Now
Investors could be adding exposure this week, amid new buying opportunities. But this market rally could quickly sour again, whether it’s for a day, week or month. So don’t get too aggressive. Also, don’t load up a margined account on software and IPOs. Sector rotation could swing away from growth once again.