June 18, 2024

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Dow Jones Futures: Market Rally Shows Broad Strength, But These Stocks Are ‘Out Of Bounds’

5 min read

Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures. The stock market rally is looking strong, the Dow Jones and S&P 500 at record highs and a steady stream of breakouts from a variety of industries. But the Nasdaq and growth stocks generally are struggling once again.


CAN SLIM investors tend to have a bias toward growth, especially highly valued growth stocks, because they typically offer the best opportunities for huge gains. But ultimately, CAN SLIM investors need to follow the market, including which stocks and sectors are leading right now.

In 2020, highly valued growth names had a tremendous year. Tesla stock, Roku (ROKU), Square (SQ) and  Teladoc Health (TDOC) delivered massive gains. As major holdings across ARK Invest ETFs, including ARKK, they fueled huge returns for Cathie Wood’s vehicles.

But this is 2021, not 2020. All of these stocks are showing significant damage. Tesla (TSLA) and Square stock are hitting resistance at their declining 50-day lines. Roku stock rebounded from its 200-day line Friday but still down sharply for the week. Teladoc stock, which broke below its 200-day in early March, crashed last week to an 11-month low.

Coinbase (COIN) is a new ARK holding but already relatively significantly. But COIN stock after its direct listing debut on April 14, only rallied for a few minutes before beginning a sharp decline that continues.

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Dow Jones Futures Today

Dow Jones futures will open at 6 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live.

Coronavirus News

Coronavirus cases worldwide reached 158.31 million. Covid-19 deaths topped 3.29 million.

Coronavirus cases in the U.S. have hit 33.45 million, with deaths above 595,000.

Stock Market Rally Last Week

The stock market rally had a decidedly mixed week.

Techs got a boost at Friday’s open from the 10-year yield tumbling on the weak jobs report, but the 10-year yield ended up rising slightly.

The Dow Jones Industrial Average rose 2.7% in last week’s stock market trading. The S&P 500 index climbed 1.2%. The Nasdaq composite fell 1.5%. The small-cap Russell 2000 edged up 0.2%.

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) slipped 1.3%, while the Innovator IBD Breakout Opportunities ETF (BOUT) edged up 0.1%.  The iShares Expanded Tech-Software Sector ETF (IGV) sank 4.2%. The VanEck Vectors Semiconductor ETF (SMH) edged up 0.25%.

SPDR S&P Metals & Mining ETF (XME) leapt just over 13% last week and Global X U.S. Infrastructure Development ETF (PAVE) gained 5.3%. U.S. Global Jets ETF (JETS) inched up 0.35%.

ARK Stocks Taking On Water

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) plunged 9.15% last week and ARK Genomics ETF (ARKG) 9%. Both have broken their 200-day lines. While both broke long losing streaks on Friday, they hit resistance at that key level.

That isn’t because ARK Invest suddenly has an uncanny knack of buying the very worst stocks. It’s just that speculative or highly valued growth is out of favor. Tesla stock actually looks like a leader, at least compared to EV rivals such as Nio (NIO), Xpeng (XPEV), let alone free-falling EV startups that have yet to deliver a single vehicle. COIN stock has tumbled after its IPO, but most recent tech IPOs have struggled, after a phenomenal 2020.

If Tesla, Roku, Teladoc, Square and COIN stock rebound, ARK Invest will reap the rewards. But these stocks may take months to bounce back, and they may not be huge winners when they do.

Meanwhile, some may not recover for years, if ever. Microsoft (MSFT) took 15 years to reclaim its late 1999 peak. Cisco Systems (CSCO) still hasn’t topped its dot-com record high. Many other dot-com busts disappeared from memory.

As a CAN SLIM investor, you want the likes of ARK Invest or other institutional investors to take on the risk of buying stocks at the bottom. But for active traders, the goal shouldn’t be to guess the bottom for fallen leaders, even huge winners like Tesla stock or Roku. The goal is to buy these stocks when they are in an uptrend, breaking out a bullish base or rebounding from key support.

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Market Rally Analysis

The Dow Jones and S&P 500 index are at record highs, but not yet extended. The Russell 2000 closed the week above its 50-day line. The Nasdaq rebounded from a sharp drop below its 50-day line Thursday morning to close that session slightly higher. It extended gains Friday, but hit resistance at its 21-day exponential moving average.

The Nasdaq actually masks the weakness in growth stocks, as ARK names such TDOC stock and Coinbase show.

When driving off the tee, golfers want to hit the fairway, but will sometimes end up in the rough. Where they can’t go is “out of bounds.” Sometimes “out of bounds” is far away, other times it’s not far from the fairway.

Right now, stock market rally conditions are fairly positive. There’s strength in metals, mining, energy, fertilizers, shipping, housing and some retail. So there’s a wide fairway to hit. But off the fairway, tech stocks are “out of bounds.”

A couple tech titans, notably Google (GOOGL), are looking strong. Some chip stocks need one or two good days to flash buy early signals, though the relative strength lines have fallen back in the past few weeks. But by and large growth and tech names are lagging right now and often outright losing.

What To Do Now

Focus on what’s working. It’s a good time to take advantage of opportunities across a variety of old economy or recovery plays. MarineMax (HZO), Nutrien (NTR), Deere (DE), Cimarex Energy (XEC), Revolve (RVLV) are among those breaking out or reclaiming buy points Friday.

Still, with the market rally still split it’s not a great time to be super aggressive.

Go through your portfolio. Do you have laggards that need to be cut? You don’t want solid gains in mining stocks or housing plays offset by losses in software and other highly valued names.

Keep working on your watchlists. A lot of stocks are setting up, but make sure the relative strength lines are close to record highs. Try to have at least a few stocks from a variety of leading groups. That will offer buying opportunities and make sure you’re staying on top of the various parts of the market.

Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.


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