Dow Jones futures turned higher vs. fair value Sunday, along with S&P 500 futures and Nasdaq futures. The coronavirus stock market rally declined last week, but rebounded from key levels and finishing strong. The action allowed Apple (AAPL), Facebook (FB) and Google parent Alphabet (GOOGL) to carve new buy points, while Advanced Micro Devices (AMD) and Tesla (TSLA) showed constructive action in their handles.
Apple stock, Facebook stock, Google stock all have handles on weekly charts, though the shakeouts were relatively modest. AMD stock rose modestly, working its way toward a cup-with-handle buy point. Tesla stock edged lower, showing some tighter action in a wild base despite some notable news during the week.
The Justice Department is moving toward a possible antitrust suit vs. Google, according to multiple reports. Several states also are working on separate litigation, also focused on Google’s ad search dominance. Google stock fell modestly late Friday on the DOJ report. Facebook stock and Apple stock also edged lower.
On Saturday, President Donald Trump tweeted that the “radical left” control Google, Facebook and Twitter (TWTR), adding that the administration is “working to remedy this illegal situation.”
Faccebook stock and AMD are on the IBD 50 list.
Dow Jones Futures Today
Dow Jones futures rose 0.4% vs. fair value, reversing higher from slim losses. S&P 500 futures climbed 0.4%. Nasdaq 100 futures advanced 0.2%. (Today, Dow Jones futures must be up 0.37% to be equal to fair value, the price that would imply a flat open for the Dow Jones Industrial Average.)
The DOJ antitrust reports could pressure Google stock to start the week. Stepped-up antitrust enforcement also could affect tech giants Facebook, Apple and Amazon.com (AMZN), as well as Twitter. Google has a market cap of $937 billion. Combined, the five companies are worth about $3.5 trillion, a big chunk of the Nasdaq and broader stock market.
China’s Commerce Ministry threatened to use “all necessary measures” in response to new U.S. curbs in chip sales and other technology to Chinese telecom gear giant Huawei. Many chip stocks sold off Friday on the expanded U.S. restrictions.
Finally, Fed chief Jerome Powell said the U.S. economy could “recover steadily” later this year in an interview with “60 Minutes” interview. But a full recovery may not happen until there’s a coronavirus vaccine..
During the coronavirus stock market rally, Dow Jones futures have had less whipsaw action, though moves were somewhat larger last week.
Coronavirus cases worldwide have reached 4.80 million, likely hitting five million by early Monday. Covid-19 deaths are above 316,000.
Coronavirus cases in the U.S. have topped 1.52 million, with deaths of at least 90,000.
Russia, at 281,000, has passed Spain in terms of coronavirus cases.
Coronavirus Stock Market Rally
The coronavirus stock market rally came under some selling pressure last week as Fed chief Jerome Powell warned of “lasting damage” from the coronavirus crisis and U.S.-China tensions rose with new curbs on chip sales to telecom gear giant Huawei.
The Dow Jones Industrial Average fell 2.65%, the S&P 500 index 2.3% and the Nasdaq composite 1.2%. The Dow Jones rebounded from its 50-day moving average. The Nasdaq composite bounced from its 21-day moving average.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rallied 1.7%. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 1.6%, . The VanEck Vectors Semiconductor ETF (SMH) fell 4%, even though AMD stock and especially Nvidia (NVDA) rallied.
One benefit of the coronavirus market rally pulling back last week was that it gave a chance for stocks to pause, shake out some weak holders and form new buy points. The only complaint about last week’s stock market action is that it rebounded so well, so quickly, especially for growth stocks.
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Facebook stock dipped 0.7% last week to 210.88. That gives FB stock a handle on a weekly chart, with a 215.38 buy point. On a daily chart, the pullback is more visible, but needs another day to show a handle there.
The relative strength line for Facebook stock is at a high. The RS line, the blue line in the charts provided, reflects a stock’s performance vs. the S&P 500 index. FB stock once again is a “Blue Dot” special, a MarketSmith list of stocks still in bases with RS lines already at highs.
Facebook stock has a 98 IBD Composite Rating out of 99. The Composite Rating combines a variety of key fundamental and technical factors. Investors should generally look of stocks with Composite Ratings in the 90s.
Google stock is not as close to its old high as fellow FANG stock Facebook, but its chart is similar. GOOGL stock dipped 0.8% last week to 1,373.06, paring those losses on Thursday-Friday. On a weekly chart, it now has a cup-with-handle base buy point of 1,415.63. On a daily chart, the would-be handle is only four days long.
Also with Facebook stock, Google stock was a Blue Dot special again on Friday.
Google stock fell 1.5% late Friday on the DOJ antitrust suit report. Stepped-up antitrust enforcement also could affect tech giants Facebook, Apple and Amazon.com (AMZN), as well as Twitter.
From a technical standpoint, a few more down days could make Google stock more attractive.
GOOGL stock has a 95 Composite Rating.
Apple stock broke out of a cup-with-handle buy point of 228.35 in late April, but the handle didn’t show up on a weekly chart. Last week, AAPL stock edged down 0.8% to 307.71. Apple stock now has a 319.79 handle on a weekly chart. In another day, it may have another handle on a daily chart, providing an alternative entry.
The RS line for AAPL stock is just below all-time levels.
Apple stock has a 95 Composite Rating.
AMD stock has had a 58.73 cup-with-handle buy point for some weeks. But last week’s 1.9% gain to 54.20 showed resilience as the coronavirus stock market rally pulled back and chips overall struggled. A move above Tuesday’s high of 56.58 could offer an aggressive entry.
AMD stock a perfect 99 Composite Rating.
Tesla stock has nearly doubled in 2020, but it’s been a wild ride. A TSLA tock run to 968.99 on Feb. 4 was followed by a tumble to 350.51 on March 18 during the market crash. Since then Tesla has rebounded powerfully yet again. A late April breakout fizzled after earnings, but Tesla stock found support at its 21-day moving average.
Tesla stock fell 2.5% to 799.17 last week, a relative modest move. In fact, there was only a 10.5% spread between the high and low of the week, the smallest weekly spread for Tesla stock in 2020.
TSLA stock has a 97 CR.
Tesla stock arguably already has had 869.92 handle entry, but the tighter action around 800 is encouraging. Investors also could use Tuesday’s high of 843.29 as an aggressive entry, but Tesla stock’s volatility adds to such risks.
Last week’s weekly action is especially surprising given the volatility in the coronavirus stock market rally and several Tesla news headlines.
CEO Elon Musk openly defied an Alameda County shutdown order and reopened the Fremont plant this past week. With Musk threatening to close down Tesla Fremont for good, the local government quickly gave in and said Tesla production could start this coming week, ignoring the ongoing operations last week.
Meanwhile, Tesla reportedly is close to choosing Austin, Texas, as the site for a fourth manufacturing site, making the Model Y and later the Cybertruck. That would join Fremont, Shanghai and a not-yet-started site outside of Berlin.
The Ultimate Tesla Bull Vs. Bear Debate
The prospect of a fourth Tesla manufacturing site is the ultimate bull vs. bear debate: Is there enough profitable demand for Tesla electric vehicles for four auto plants, up from just one until the tail end of 2019?
If Tesla demand ramps up to well above one million electric vehicles annually at current prices by 2022, it’ll be hard to deny Elon Musk’s success. But if Tesla demand flattens out well below one million, the excess production capacity will be a major headwind.
Bulls will point to a rapid increase in deliveries in the past few years. Bears will note that Tesla demand has fallen in the U.S. and appears to be peaking in Europe after expanding, where EV competition is picking up.
(That new EV competition is a triple threat for Tesla. First, EV alternatives are curbing Tesla demand, at least at the margin. Second, Tesla could be forced to make new price cuts. Third, as automakers sell more EVs of their own, they need to buy fewer emission credits from Tesla. Tesla generates substantial revenue — and most or all of its profit — from such emissions sales in the U.S. and Europe.)
China will likely be a strong growth area in the near term. But will it follow the U.S. and Europe in seeing a burst of initial demand, following by flat-to-declining sales? EV competition is expanding in China as well.
Tesla says it’ll hold a Battery Day event in the near future touting new battery advances, though Elon Musk recently signaled it won’t happen until at least June. Big improvements that expand Tesla vehicles’ ranges or make them significantly cheaper could be a boon to demand and profits.
If Tesla battery technology is a big step up, how long before it’s actually in cars? Toyota (TM) has spent years developing solid-state batteries, which may offer far storage capacity, but those are a few years away from the road.
But some past Tesla’s events, notably 2019’s Autonomy Day, turned out to be non events.
Keep in that the the long-term success or failure of Tesla the company doesn’t necessarily mean that much for TSLA stock right now. What matters is what the stock market thinks of Tesla’s long-term prospects.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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