Dow futures were little changed early Friday, along with S&P 500 futures and Nasdaq futures, with more inflation data expected.
US-listed Chinese stocks fell on Friday after China’s largest real estate developer warned of huge losses in the first half. Country Garden had missed interest payments earlier in the week. Hong Kong’s Hang Seng fell 0.9% and the Shanghai Composite fell 2%.
Thursday’s stock market rally started off strong, with the CPI inflation report helping to fuel a much needed rebound. But the major indices, which hit resistance, pared gains, although the Nasdaq closed above the 50-day line.
Treasury yields, which initially fell below 4%, have rebounded, and are likely to pressure stocks.
nvidia (NVDA) tried to regain the 50-day line but closed slightly lower on Thursday. An AI-led market recovery needs an AI leader.
Lululemon Athletica (Lulu), visa (Fifth), Master Card Credit Card (Master’s), Costco wholesale (it costs), KB major (KBH), Arista Networks (Anita), carnival (CCL), service now (now) And Miniso (MNSOTrading takes place near the buy points.
KB Home was IBD Thursday’s stock.
Dow jones futures today
Dow futures rose against fair value. S&P 500 futures were flat. Nasdaq 100 futures fell 0.1%.
The 10-year Treasury yield rose 2 basis points, to 4.1%.
Copper futures fell more than 1%, likely on renewed China concerns.
The Labor Department will release the July Producer Price Index at 8:30 a.m. ET. Economists expect a 0.2% increase compared to June for the general PPI and the core PPI. Producer price inflation should rise to 0.7% from 0.1% in June, while core wholesale inflation should fall to 2.3% from 2.4%.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Stock market rise
The stock market rally started off strong, but it wiped out all or nearly all of its initial gains.
The Consumer Price Index showed modest monthly gains, with annual inflation coming in just below expectations.
The 10-year Treasury yield jumped nearly 8 basis points to 4.08%, after initially falling to 3.96%.
The Dow Jones Industrial Average rose 0.15% in stock market trading Thursday, buoyed by post-earnings gains. Disney (dis) jump. The S&P 500 ended slightly higher. The Nasdaq Composite Index rose 0.1%. Small cap Russell 2000 fell 0.4%.
The Nasdaq was up just over 1.6% 35 minutes after the open, but hit resistance at the 21-day moving average, and finished below the 50-day line again.
The S&P 500, which jumped above the 21-day line on Thursday morning, is not far from the 50-day/10-week tests. The Dow still held for 21 days. The Russell 2000 retook the 21-day streak, but reversed lower, approaching 50 days.
US crude oil prices fell 1.9 percent to $82.82 a barrel.
Exchange Traded Funds
Among the ETFs, the Innovator IBD 50 ETF (fifty) decreased by 0.7%. iShares Expanded Technology and Software ETF (IGV) rose 0.6%, with NOW stock gaining significantly. VanEck Vectors Semiconductor Corporation (SMH) fell 0.2% with NVDA stock taking the top spot.
SPDR S&P Metals & Mining ETFs (XME(down 1.8% and US X Global Infrastructure Development Fund (ETF) )cradle) italicized by 0.3%. US Global Gates Foundation ETF (Planes) increased by 0.15%. SPDR S&P Homebuilders ETF (XHB) declined 0.7%. Energy Defined Fund SPDR ETF (xle(Ends just short of break-even and the SPDR Health Care Sector Selection Fund)XLV) lost less than 0.1%.
SPDR Industry Selection Fund (XLI) decreased by 0.3%.
Top five Chinese stocks to watch now
Nvidia briefly recovered its 50-day moving average, to 435.74 Thursday morning, but reversed lower, falling 0.4% to 423.88. Shares are now down 5.1% so far this week. NVDA stock is down 1.9% in less than 10 weeks. A week’s close of more than 2% below the 10-week line is a sell signal.
Nvidia fell by a small percentage in pre-market trading on Friday.
Of course, Nvidia could rebound quickly from here, creating a strong new buying opportunity. But Nvidia could move sideways or decline for a while before building the right side up from a new base.
Stocks near buy points
LULU shares rose 0.6%, to 384.55. Shares rose to 394.64, the consolidation buy point regained 389.06 briefly before paring gains. Lululemon has been consolidating for the past eight months, and has tightened up in recent weeks.
Visa stock closed up 0.4%, at 240.16, paring morning gains. Payments giant Dow Jones is holding it in a range of 235.57 fixed-base buy points. Thursday’s intraday move provided an additional entry within a narrowing three-week pattern that formed in a buy range.
The MA rose 0.9% to 397.14, still in the 392.20 flat-base overbought range and extending from the rebound from the 10-week line.
COST stock ended up 0.3%, at 561.49, after rising as high as 569.21 early Thursday. That briefly regained 564.75 buying points and broke the downtrend in a high handle.
KBH fell 2.4% to 52.73, again below the 21-day line and approaching the 50-day mark. KB Home has 55.37 points to buy from a bullish base. Its relative strength line is trading near the highs.
ANET stock fell 0.65% to 176.30, just below the 178.36 buy point, according to MarketSmith analysis. Arista Networks broke out into the buy zone on August 1st after the earnings, and then pulled back into the entry zone. Some calm and court action is constructive.
CCL rose 0.5% to 17.36, hitting the 21-day resistance and above the rapidly rising 10-week line. Carnival stock has 19.55 points buy from a flat base after a long run. Investors can find some early entries.
NOW stock initially rose to 566.07, retracing the 50-day and 21-day lines and flirting at least with a short downtrend breakout. But that was then. ServiceNow closed up 0.85%, at 555. A move above Thursday’s high could provide a new buying opportunity.
MNSO stock fell 1.6% to 20.20. The shares are just above 19.49 buy points, but have been trading tightly over the past few weeks. Clearing this shelf can introduce a new entry.
Market rally analysis
There is no doubt that Thursday was a disappointment with a strong and rapid fading. Indices, especially the NASDAQ, are hitting resistance while trading around key support.
Just as indicators can hold support several times and then break down, sometimes they will hit resistance several times before breaking out.
In which direction will the market go? This could be decided in the next few days, or the indexes could move sideways for several weeks.
A lot of damage has been done among leading stocks, particularly in technology, including megacaps, AI plays, and the broad chip and software sectors.
It’s an exaggeration to say that the market’s rise depends on Nvidia doing well, but not too much.
It’s time to market with IBD’s ETF Market Strategy
What are you doing now
On the one hand, growth investors have been waiting for the decline in the Nasdaq and blue-chip stocks for some time. This happened. Now we need to see if the market rally finds support and takes off again.
Work on your watchlists in pencil. A number of names have been retracting nearly 50 days from their streaks. These may provide buying opportunities with strong bounces, but further losses may lead to sell signals.
On a larger scale, look for stocks that are showing relative strength. These may be the winners of the next phase of the Taurus sign
If the signs turn positive, don’t get too excited about a strong opening, as Thursday showed. Gradually rebuild exposure, and be quick to lower it
If your stocks or general market conditions show more damage, you will need to expand further.
Read the big picture every day to stay in sync with the market trend, leading stocks and sectors.
Please follow Ed Carson on Twitter at @tweet For stock market updates and more.
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