Dow Jones futures rose slightly during extended trading, along with S&P 500 futures and Nasdaq futures. Lululemon, Costco and Broadcom reported profits after the close.
The stock market rally recovered modestly on Thursday, but only recovered a small part of the losses of the past few days. Investors should still exercise caution amid choppy market moves. The S&P 500 remains below the 200-day line and most indices are also encountering resistance at their 21-day moving averages.
Semiconductor stocks did well, with chipmaker Nvidia (NVDA) among the best performing S&P 500 Thursday. But makers of chip devices are generally better off KLA Corp. (KLAC), Axcelis Technologies (ACLS) and Ultra clean companies (UCTT) flashing buy signals Thursday. ASML (ASML) and Applied materials (AMAT) are among those near points of sale.
Costco wholesale (COST), Lululemon Athletica (LULU) and Broadcom (AVGO) reported late Thursday.
COST shares had changed little overnight after Costco’s earnings and sales fell short of scrutiny. Costco shares lost a fraction during Thursday’s regular session, but are down nearly 11% year-to-date this month.
LULU shares plummeted during extended trading after the yoga apparel retailer traded slightly lower for the critical holiday quarter. Lululemon’s revenue was slightly higher than third-quarter views. Lululemon shares were up 0.6% to 374.11 Thursday, entering the range of a buy point of 370.56 cup-with-handle. But it will fall out of that buying area.
Shares of AVGO rose modestly after hours as Broadcom’s earnings and expectations beat top ratings, while the chip and software giant also increased its dividend. Broadcom shares closed 2.4% higher to 531.08, just below the 200-day mark. Last week’s high of 552.42 could provide some sort of entry.
LULU shares are listed on IBD Leaderboard as a game of profit options. KLAC shares are listed on IBD Long-Term Leaders.
Dow Jones Futures Today
Dow Jones futures rose 0.1% from fair value. S&P 500 futures and Nasdaq 100 futures rose 0.2%.
The 10-year Treasury yield fell 2 basis points to 3.47%.
Crude oil futures rose 1%.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.
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Stock market rally
The stock market rally had a solid session, with indices largely moving sideways after the first hour of trading.
The Dow Jones Industrial Average rose 0.55% during Thursday trading. The S&P 500 index rose 0.75%. The Nasdaq index rose 1.1%. The small-cap Russell 2000 gained 0.7%.
US crude oil prices fell 0.8% to $71.46 a barrel, with some large intraday swings. Crude futures are now at levels that the Biden administration signaled would lead to the replenishment of the Strategic Petroleum Reserve, which has been drained to long-term lows this year to lower energy costs.
The 10-year Treasury yield rose 8 basis points to 3.49%, but it was an inside day after falling to 3.41% on Wednesday.
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) rose 1.8%. The VanEck Vectors Semiconductor ETF (SMH) soared 2.55%. Nvidia Stock, ASML, KLA, and AMAT are all SMH holding companies. Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) gained 2.4% and ARK Genomics ETF (ARKG) gained 2.2%.
SPDR S&P Metals & Mining ETF (XME) was up 0.3% and the Global X US Infrastructure Development ETF (PAVE) was up 0.8%. The US Global Jets ETF (JETS) fell 0.3%. SPDR S&P Homebuilders ETF (XHB) rose 0.6%. The Energy Select SPDR ETF (XLE) and the Financial Select SPDR ETF (XLF) were up 0.1%. The Health Care Select Sector SPDR Fund (XLV) rose 0.9%.
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Chip stocks near purchase points
Several chip equipment manufacturers are located in or near buying zones. In general, semiconductor equipment manufacturers have some gloomy forecasts for the year ahead, but chip equipment shares often bottom out long before business turns.
KLAC shares rose 2% to 395.92, clearing a number of buy points between 392.60 and 396.02. Trading was very light, but there were some big gains in peak volume as KLA recovered from the October and November bear market lows. The relative strength line is at an all-time high, even with stocks well off their peak in January. KLA stocks are long-term leaders, but the time to buy a stock as an LTL is when it’s closer to the 200 or 50 day lines.
ACLS shares rose 4.9% to 81.93 to rebound above a buy point of 80.34 cups with a handle, according to MarketSmith’s analysis. Axcelis has expanded well from the 50-day line, but the 21-day line is racing higher. The RS line for ACLS stocks is at a 15-year high.
The UCTT share climbed 5.6% to 36.59, surpassing a buy mark of 36.10 cup-with-handle to reach its best level since April. The base formed at the very bottom, with no prior uptrend. But the handle largely formed above the 200-day line. The RS line for UCTT stocks is at an 8-month high.
ASML share rose 0.9% to 606.89. Shares rose from a bear market low on Oct. 13 to Nov. 15. Since then, the high-end Dutch semiconductor equipment giant has been consolidating comfortably above the 200-day mark, at its best level since April. The 21-day line is catching up. A break above recent highs could provide an early entry. Ideally, ASML would rebound from the 21-day line or forge a good foundation.
AMAT shares gained 2.4% to 108.61 on Thursday. The stock is slightly above the 200-day line after its own October 13-November. 15 run. Applied Materials is on a tight three-week pattern, offering a buy point of 112.22. Investors may want to use a short trendline, perhaps triggering Thursday’s high of 109.43, as a slightly earlier entry.
Meanwhile, chip giant Nvidia was up 6.5% to 171.69, recovering from its 21-day line. NVDA stock is now just below the 200-day mark. An aggressive trader could use a decisive clearing of the 200-day line as a buy signal. But it might be better to wait until Nvidia shares have passed 200 days and form some kind of consolidation, a la ASML or AMAT, to spy on a more secure entry.
Analysis of the market rally
The stock market rally ended a recent losing streak with modest to solid gains. But it didn’t fundamentally change the technical picture. Major indices are moving sideways, finding support at key levels but also encountering resistance.
The S&P 500 index just managed to close above its 21-day moving average. The benchmark index should return above its 200-day moving average and peak on December 1.
The Nasdaq composite held support at its 50-day moving average and reached the 11,000 level, but closed just short of its 21-day. The Russell 2000, which tumbled below the 200-day and 21-day line earlier this week, pulled back from its 21-day intraday.
The Dow Jones, which closed just above its 21-day moving average on Wednesday, rebounded modestly on Thursday.
The markets may not make a decisive move if major news is forthcoming.
The November producer price index will be published on Friday morning. Wholesale inflation should show a continued steady slowdown. But the real concern is in the service pricing. The November CPI report is scheduled for December 13, and the Fed’s year-end meeting ends the following day.
Those events can be the catalyst for major market moves up or down. Sure, the indices have made big moves over the past month around October’s CPI, Fed Chief Powell’s speech and more, but sideways the choppy action continued.
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What to do now
Some stocks flashed buy signals Wednesday, including KLAC, ACLS, United Rental (URI) and Dexcom (DXCM). Investors could have nibbled on some of these — or not.
Overall exposure must remain low. The current market trend is sideways and choppy. That’s just a tough environment to progress in stock trading. If you make new purchases and make a decent profit, consider taking partial profits quickly. Too many promising stocks have made gains of 5% to 10% in recent weeks.
A number of inventories from different sectors are forming. So keep your watchlists up to date and stay engaged.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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