Stocks perked higher at Monday’s open, as the Dow and S&P 500 confirmed recent levels of support, and the Nasdaq snapped above resistance at its 50-day moving average. Chips and chip equipment makers led, as Nvidia, Applied Materials and Lam Research staked out early leads. Virgin Galactic spiked on a successful test flight. Cisco Systems and Microsoft rallied to the top of the Dow Jones today.
The Nasdaq Composite led the early advance, rallying 1.1% out of the starting gate as Lam Research (LRCX), Micron Technology (MU) and Applied Materials (AMAT) paced the index. The iShares PHLX Semiconductor ETF (SOXX) jumped 1.9%.
The S&P 500 clocked in with a 0.7% gain. The Dow industrials popped 150 points, trading 0.4% higher on the stock market today.
Moderna climbed more than 2% after announcing a manufacturing agreement with South Korea’s Samsung Biologics, contracted to produce hundreds of millions of doses of Covid-19 vaccine for delivery outside the U.S.. Moderna shares are below a 189.10 buy point in a cup-with-handle base.
On the S&P 500, ResMed (RMD) and HP Inc. (HPQ) each rallied nearly 2%. Citi upgraded HP stock to buy, from neutral, and raised its price target from 29 to 40, almost 27% above where shares closed on Friday. HP has a year-to-date gain of more than 28%.
Among chip stocks, Nvidia swung 2.8% higher, leaning toward a fourth-straight gain as it rebounds from a failed April breakout. The IBD Leaderboard stock is entering the sixth week of a possible base pattern.
Dow Jones Today: Cisco, Microsoft Lead
Intel (INTC) jumped 1.2% in early trade. Intel shares have fallen hard since mid-April, but rebounded last week from support at the stock’s 200-day/40-week moving average.
Salesforce.com (CRM) jumped 1.4% ahead of its first-quarter report, due on Thursday. Salesforce stock price has draped itself along a declining 10-week moving average for the past six months. It is once again trading back above its converged 50-day and 21-day moving averages.
Stocks To Watch: Iqvia, Zebra, Alphabet
IBD’s Investing Action Plan reports stocks to watch early in the week include Iqvia (IQV), which is in buy range after clearing a four-weeks-tight pattern. Zebra Technologies (ZBRA) has rebounded from a test at its 10-week line and is set form a possible flat base with a 518.76 entry.
M&A News: Martin Marietta, Cabot, Cimarex
In merger and acquisition news, construction aggregates leader Martin Marietta (MLM) climbed 0.7% after announcing it would pay $2.3 billion in cash for a string of Western region quarries and cement plants owner by Lehigh Hanson. MLM stock has slipped back into a buy range above a flat base buy point at 353.66.
Cabot Gas & Oil (COG) tumbled more than 7%, Cimarex Energy (CEX) dropped 8.2%, after the two companies agreed to an all-stock combination. The combined companies would have a market value of around $17 billion.
Bitcoin, Oil, Copper, Bond Yields
Bitcoin dropped below $32,000 Sunday, briefly narrowing its gain for the year to less than 10%. The cryptocurrency rebounded sharply Monday morning to trade above $37,700, according to Coindesk. Bitcoin had run up to a record high above $64,800 on April 14.
Oil prices and copper prices, strong factors in the market’s recent volatility, both rebounded modestly early Monday. West Texas Intermediate oil price futures rose 1.4% to above $64 a barrel — below the 33-month high at $67.98 posted on March 8.
Bond yields eased slightly, with the 10-year yield trading at 1.61%, down from its settle at just above 1.63% on Friday, according to CBOE data. Yields had skirted pre-pandemic levels late in March, climbing to almost 1.76%, the highest level since January 2020.
Nasdaq Vs. Dow Jones Today
Both the S&P 500 and the Dow Jones today are coming off firm rebounds from support at their 50-day/10-week moving averages. A daily chart shows both settling back above their 21-day lines as a base of operations.
The Dow has declined in four of the past five weeks. The S&P 500 slipped in three of five. But that five-week consolidation has been very modest.
The Dow ended Friday less than 3% below its record peak, notched in the midst of the consolidation on May 10. The industrials are effectively flat with where they headed into the consolidation in the week ended April 16.
For more detailed analysis of the current stock market and its status, study the Big Picture.
The S&P 500 is about 4% below its May 7 peak and not quite 1% below its closing price in the April 16 week.
The Nasdaq Composite, which posted a narrow gain for the first time in five weeks last week, is another story. Rather than rebounding, it continues to find resistance and remain below its 50-day line. While the Dow and S&P 500 have recently traded above or right around their 21-day lines, the Nasdaq has not held support above that line since May 3.
Still, the Nasdaq has pulled back a modest 5% from its April 29 high. It is about 4% off where it started its consolidation in mid-April.
Navigating A Market Under Pressure
The market remains in an uptrend, although the status is “Uptrend Under Pressure.” That status suggests three courses of action for investors: Be very careful about making any new buys. Make a defensive game plan for each stock you own. Stay disciplined and flexible.
Most investors at this point will have either taken profits or cut losses short and rotated into cash, while maybe holding on to a few big winners. It’s a good time to build a watchlist of stocks that have consolidated and build breakout-ready chart patterns, in order to be ready when the market finds its groove.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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