Dow Jones futures and S&P 500 futures rose slightly late Wednesday, while Nasdaq futures rose somewhat more. The stock market rally had a strong session as President Joe Biden was sworn in, with Netflix (NFLX) and other big-cap techs pushing the Dow Jones, Nasdaq and S&P 500 to record highs.
Netflix stock surged on fourth-quarter results while fellow FANG stock, Google parent Alphabet (GOOGL), also broke out. JD.com (JD), Dynatrace (DT), Teladoc Health (TDOC) and Cadence Design Systems (CDNS) also cleared buy points Wednesday.
Apple stock and, arguably, Microsoft (MSFT) flashed early buy signals Wednesday, but looming earnings reports significantly raise the risks.
While it’s nice to see tech giants stirring, the Nasdaq already looks extended again.
Dow Jones Futures Today
Dow Jones futures rose 0.2% vs. fair value. S&P 500 futures advanced 0.3%. Nasdaq 100 futures climbed 0.6%.
Coronavirus cases worldwide reached 97.30 million. Covid-19 deaths topped 2.08 million.
Coronavirus cases in the U.S. have hit 24.99 million, with deaths above 415,000.
Stock Market Rally Wednesday
U.S. Stock Market Today Overview
Last Update: 4:28 PM ET 1/20/2021
The stock market rally had a powerful session, with the Nasdaq leading the major indexes to record highs. President Biden’s inauguration went without incident with security beefed up throughout Washington, D.C., following the Jan. 6 storming of Capitol Hill.
With Kamala Harris sworn in as vice president, Democrats now hold the tiebreaker in a 50-50 Senate.
The Dow Jones Industrial Average rose 0.8% in Wednesday’s stock market trading. The S&P 500 index climbed 1.4%. The Nasdaq composite jumped 2%.
On Wednesday, big-cap techs led, with Netflix and Google stock discussed a little later.
Apple stock rose 3.3% to 132.03, rebounding from its 21-day exponential moving average once again, providing an early entry. The iPhone maker is in a cup-with-handle base with a 138.89 buy point. Microsoft stock leapt 3.65% to 224.34, reclaiming its 50-day line. The official buy point is 232.96 with early entries at 228.12 and 227.28. Investors could buy MSFT off the 50-day line or if it crosses a trend line from the top of the consolidation. However, with Apple (AAPL) and Microsoft earnings next week, taking a new position in these Dow Jones megacaps would be risky, unless using an earnings options strategy.
As for other tech giants, Amazon.com (AMZN) rose 4.6%, rebounding from its 50-day line and nearing some early buy signals. Facebook (FB) was up 2.4% and Salesforce.com (CRM) 3.1%, both continuing rebounds from their 200-day lines.
Growth stocks were mixed, with chips taking a breather and software popping after some lackluster action in recent weeks.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 1%, while the Innovator IBD Breakout Opportunities ETF (BOUT) dipped 0.6% after surging 6.5% on Tuesday. The iShares Expanded Tech-Software Sector ETF (IGV) rose 1.9%, with MSFT and CRM stock top holdings. The VanEck Vectors Semiconductor ETF (SMH) edged down 0.4%.
Netflix Stock, Google Lead Breakouts
Netflix stock spiked 17% to 586.34, hitting a record high and clearing a 575.47 buy point from a six-month consolidation. Investors also could have bought NFLX stock at 569.70, above the high of Wednesday’s first five-minute bar of trading. The relative strength line jumped Wednesday, but has been lagging in recent months as Netflix stock paused while the market rally kept rising.
NFLX stock was the IBD Stock Of The Day.
Google stock leapt 5.4% to 1,880.07, clearing a flat base with an 1,843.93 buy point, according to MarketSmith analysis. Investors could have bought GOOGL stock as it rebounded from its 50-day line. The RS line isn’t too far from new highs but also has been moving sideways for the past year.
JD.com stock rose 4.6% to 95.31, reclaiming a 92.87 buy point. Shares vaulted above that entry on Jan. 5, hitting 96.20, but fell back the next day, finding support at the 10-week line over the next several sessions. JD.com stock rallied Wednesday as Alibaba (BABA) founder Jack Ma appeared in public for the first time since October, after his critical comments about regulators reportedly spurred the crackdown vs. the e-commerce giant as well as rivals such as JD.com. BABA stock popped 5.5%, back above its 50-day line.
Teladoc stock jumped 6% to 246.74, moving above a 236.76 handle buy point and what is either a cup or a squished double-bottom base. The top of the handle was right at the mid-October peak. The RS line for TDOC stock has moved higher but has lagged since early October.
Dynatrace stock rallied 8% to 47.30, above a 45.17 handle in a pattern that looks a lot like Teladoc stock. The RS line for DT stock is at least above its handle high, but has lagged since early July.
Cadence Design stock rose 1.8% to 140.10, clearing a three-weeks-tight pattern with a 138.64 buy point. The tight pattern comes just above a prior base for CDNS stock. Rival Synopsys (SNPS), which has a very similar pattern to that of Cadence Design stock, extended Tuesday’s move past a three weeks tight.
Stock Market Analysis
With tech giants driving the stock market rally Wednesday, the Nasdaq is now 7.8% above its 50-day line. While not quite at the Jan. 8 peak of 8%, when the Nasdaq gets 6% or so above its 50-day the odds of a pullback are high, with higher risks that any retreat will be larger. Also, the Nasdaq is 4% above its 21-day line vs. 3.7% on Jan. 8.
Nasdaq 100 futures point to a solid open, signaling the Nasdaq will become further extended.
Last week’s pullback briefly reined in the Nasdaq and bullish sentiment, but it really was a minor retreat. Even so, a number of growth stocks sold off hard at times last week. With recent IPOs so prevalent among the current crop of leading stocks, a Nasdaq retreat to the 50-day line could have a massive impact on growth investors’ portfolios.
Make sure to have diversity among your leaders, and not be too exposed to chip stocks or IPOs or tech giants. Among cyclicals, Eastman Chemical (EMN), Deere (DE), Caterpillar (CAT) and Nutrien (NTR) are trading tightly around or just above buy zones.
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