Stock futures muscled up from early losses, into mixed trade Tuesday, as the market prepared to relaunch after the 3-day holiday break. Match Group and Linde were early leaders, lifted by company news. Netflix was positioned to retake a buy point, and Dynavax Technologies surged ahead of the IBD 50 list. Visa and Goldman Sachs led the Dow Jones today, as a bounce in bond yields continued.
Dow Jones futures rose 0.1%. S&P 500 futures traded a fraction above fair value. Nasdaq 100 futures were roughly flat, as biotechs came under early pressure. Top China stocks rallied following a strong two-day performance in Hong Kong and Shanghai.
Industrial gases manufacturer Linde (LIN) led the S&P 500, rising 1.6% after news reports revealed discussions related to a potential hydrogen-production facility located in Poland. Linde is in a buy range above a 305.81 buy point. The buy zone extends to 321.10.
Netflix (NFLX) stock also traded high on the S&P 500, up more than 1% early Tuesday. A three-week rally lifted Netflix shares almost 15%, briefly topping what IBD MarketSmith analysis charts as a 593.39 entry in an eight-month consolidation. Premarket action suggested Netflix stock would retake that buy point at the starting bell.
Match Group (MTCH) led the Nasdaq 100, bolting more than 11% higher. Standard & Poor’s announced late Friday the stock would join the S&P 500 index starting Sept. 20. Match stock is set to retake support at its nearly converged 10- and 40-week moving averages.
Dynavax Technologies (DVAX) rallied to the front of the IBD 50 list, up 3.8% in premarket trade. The stock is five weeks into an eight-week hold rule, following a fast-rising breakout on Aug. 5. The stock presents investors with a balancing act, up more than 69% from its buy point, while trading more than 100% above its 200-day moving average.
Coupa Software (COUP) and Casey’s General Stores (CASY) are scheduled to report earnings after Tuesday’s close.
Visa (V) led the Dow in early trade. Johnson & Johnson (JNJ) dropped 0.6%, to the bottom of the Dow, after Morgan Stanley downgraded the stock to equal weight from overweight. The note left the J&J stock’s price target unchanged at 187, about 7% above Friday’s closing price. Morgan Stanley also downgraded Amgen (AMGN) and Vertex Pharmaceuticals (VRTX).
Dow Jones stocks Apple (AAPL) and Microsoft ((MSFT)) remain listed on IBD’s Leaderboard lineup. Apple stock edged a fraction higher Tuesday as it moves higher in a buy range that extends to $155.40. Microsoft remains extended a breakout in June.
Vital Signs: Bond Yields, Oil Prices, Bitcoin
Bond yields continued to bounce, following a big jump on Friday. The 10-year Treasury yield added 4 basis points early Tuesday, rising to 1.36%. The yield settled just above 1.32% on Friday, after trading above 1.37% and as low as 1.12% in August.
Oil prices have been testing resistance around the $70 level for the past three sessions. Prices on Tuesday shifted lower after Bloomberg reported on Sunday that Saudi Arabia had rolled back its prices to Asian markets by more than twice the expected amount in a bid to expand its market share in the region.
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A three-week rally has left prices up 10% from a late-August low, but the rally stalled at the $70 level. West Texas Intermediate futures on Tuesday were down 1.5% to just above $68 a barrel.
Meanwhile, Bitcoin is holding above the $50,000 level. The cryptocurrency dipped slightly to trade around $50,930 in early action, according to Fintech Zoom. It traded as high as $52,912 and as low as $50,577 over the past 24 hours.
3 Top Stocks To Watch: Generac, Atkore, Copart
Generac Holdings (GNRC) is a stock to watch this week, with the impact of Hurricane Ida driving additional demand in for emergency generators. The stock closed on Friday less than 1% below a 457.10 buy point in a six-week cup base.
Atkore (ATKR) traded low in a buy range, above a 90.18 entry in a 13-week cup.
Copart (CPRT), the top-ranked stock in the auto retailers industry group, is in a five-week flat base ahead of its late-Wednesday earnings report. The buy point is at 149.16, 2% above where the stock ended on Friday.
The Dow Jones today is waiting for input. The index has been hovering comfortably above its short-term 21-day line, and less than 1% from its record high set Aug. 16. That is not the case with the Nasdaq, which climbed in 10 of the past 12 sessions, knocking out new highs on seven of those days. The S&P 500 has been maintaining a solid margin above its rising 21-day moving average, and repeatedly racking up new highs in the process.
Year-to-date, the Dow is up 15.6%, the Nasdaq has a 19.2% gain and the S&P 500 has climbed 20.8%.
Growth stocks are the market’s hot ticket right now, with the Innovator IBD 50 ETF (FFTY) easily outrunning the market with a 5.4% gain last week. The index clocked an 8.4% advance in August, more than double that of the Nasdaq Composite.
The advance left the fund on Friday in a buy range, above a 50.06 buy point in a 28-week consolidation. That is a positive, because it shows the growth stock tracker coming up for air for the first time since February.
But there has also been a lot of leggy action within the gains, leaving many IBD 50 stocks extended well into profit-taking zones. The market remains squarely in “confirmed uptrend” status. There has been a recent increase in distribution days — selling by large institutions, but the distribution day count remains at comparatively low levels on both the Nasdaq and S&P 500.
Still, almost 20% of the current IBD 50 last are trading more than 20% above recent buy points. That is an unusually high number. Investors should be clear on how to recognize climax topping behavior, including exhaustion gaps and upper channel line breaks, and should review the other chart signals that suggest a stock may be becoming too extended.
Please follow Alan R. Elliott on Twitter @IBD_Aelliott
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