The Dow Jones futures rose slightly on Tuesday night, as did the S&P 500 futures and the Nasdaq futures. The stock market rally had a quiet Tuesday, although major indices hit record highs during the day. The Nasdaq still looks expanded, taking notable precautions. Lyft warehouse, Enphase Energy ((ENPH), Playgroup ((MTCH) and Dow Giant Cisco Systems ((CSCO) were remarkable movers after hours.
On Tuesday, Tesla ((TSLA) Rival Nio share and recent IPO C3.ai ((AI) rush through purchase zones. Bitcoin has seen big gains in buying Tesla recently GameStop ((GME) broke below another notable level.
Twitter gains outpaced views along with Enphase Stocks, Rapid7, Lyft and Cisco Systems. Twitter stock rose 3.5% overnight and Lyft rose 12% after both closed, which extended the buy points a bit. Enphase stock fell 5.6% and moved from its 10 week line towards a buy point on a new base after a recent rebound. RPD stock rose when it traded at a flat base. Cisco stock fell 5.4% on poor forecasts after hitting a 52-week high on Monday.
Online dating giant Match Group announced late Tuesday that it would pay $ 1.725 billion for Hyperconnect, a South Korean social media company that has video and audio chat apps. Match stock rose 2.4% overnight, signaling a move beyond a consolidation area that begins on December 17th.
GM stock fell Tuesday from Monday’s highs.
Bitcoin rises, Tesla shares fade
Bitcoin price rose to $ 48,200 early Tuesday and was trading above $ 46,000 in evening trading, little changed from 24 hours earlier. Bitcoin announced on Monday that Tesla had bought the $ 1.5 billion cryptocurrency.
Tesla stock fell 1.6% on Tuesday, erasing Monday’s weak profit.
Nio, AI Stock stand out
Tesla’s Chinese rival Nio rose 6.4% to 62.84, a record close that crucially clarified a downward sloping trendline in a new consolidation just above an earlier base. By the close of trading on Tuesday, Nio stock was slightly extended from that early entry, but could have a new buy point at 67.09. On Monday, Nio shares reclaimed a prior Buy point and peered beyond the trend line.
The most recent IPO AI stock rose 12% to 168.92 and passed a buy point of 160.53 of one Basic IPO. AI is just outside the 5% chase zone, which extends to 168.56.
GameStop Stock keeps falling
Finally, that GameStop ((GME) Saga set a grim new milestone. GameStop shares closed on January 27th 1,054% above its 50-day line MarketSmith analysis. GME stock is now below its 50-day limit. Shares fell 16% to 50.31 on Tuesday. That’s 90% less than the GME stock’s peak of 483 on Jan. 28.
Biden, Yellen meeting with CEOs
President Joe Biden, Vice President Kamala Harris, and Treasury Secretary Janet Yellen met with key CEOs and directors. These included JPMorgan CEO Jamie Dimon and Walmart CEO Doug McMillon, who is also the chair of the Business Roundtable. Business leaders expressed their support for a sizeable new stimulus package but signaled concerns about a minimum wage, particularly at this point. Biden is pushing for a $ 1.9 trillion stimulus plan despite signaling that he can accept tighter restrictions on direct checks of $ 1,400. The president has also hinted that a $ 15 hike in the minimum wage may not be part of a stimulus package if done via a budget reconciliation bill. This legislation must be limited to tax and spending measures.
Dow Jones Futures today
Dow Jones futures rose 0.3% from fair value. The S&P 500 futures were up 0.3%. The Nasdaq 100 futures were up 0.3%. The Cisco share consists of a Dow Jones, S&P 500 and Nasdaq 100 component
Coronavirus cases reached 107.38 million worldwide. Covid-19 deaths topped 2.34 million.
Coronavirus cases in the US have hit 27.79 million people, with deaths over 479,000.
Stock market rally
The stock market rally saw little movement in any of the major indices, but all made new highs. The Nasdaq topped 14,000 for the first time. The tech-heavy index remains longer than the 50-day line.
The Dow Jones Industrial Average closed just below break-even on Tuesday Stock exchange trading. The S&P 500 index fell 0.1%. The Nasdaq network rose 0.1%.
Under the best ETFs, the innovator IBD 50 ETF (FFTY) and the innovator IBD Breakout Opportunities ETF (STRUGGLE) rose by 0.9%. The iShares Expanded Tech-Software Sector ETF (IGV) rose by 0.85%. The VanEck Vectors Semiconductor ETF (SMH) decreased by 0.3%.
Market rally warning flags
The stock market rally is at record highs while leading stocks are doing well. However, there are some warnings.
The Nasdaq is now 7.9% above its 50-day moving average and 4% above its moving average 21-day exponential moving average. If the Nasdaq is more than 6% above its 50-day line, the risk of a pullback increases. The longer the index becomes, the higher the risks and the greater the likelihood of a significant decline.
On Monday the Nasdaq closed 8.1% above its 50-day line and 4.3% above its 21-day line. On Jan 25, shortly before a pull-out, those numbers were 8.2% and 4.1%, respectively. On September 2, shortly before a correction, those numbers were 11.6% and 6%. On March 10, 2000, the Nasdaq closed 17% above its 50-day high and 7.8% above its 21-day high.
The Nasdaq could definitely continue to rise from here. What happens after that …?
Ideally, the stock market rally could move sideways or gradually retreat for a few weeks, allowing the 50-day price to catch up without investors suffering serious losses.
Leverage for investors
Margin debt rose 34% in December one year ago. That’s a seven-year high, but below the 55% gain usually associated with spikes before a bear market. However, call options skyrocketed 437% year over year in January. Coupled with the surge in leveraged ETFs, it’s clear that investor leverage is at least showing a yellow flag.
The huge gains on several hot stocks are also raising some eyebrows at the froth in the overall market.
Digital turbine ((APPS), EXP world ((EXPI), Futu Holdings ((COME IN) and Tilray ((TLRY) look very extended and may show a climax type action. They could keep running or even go sideways, as Tesla stock did after it looked like a high in early January. However, the risk of a sharp withdrawal is high. Investors should definitely have a game plan and exit strategy for these names.
There seems to be a strong desire for the next rocket to shake off the risks. GME stocks and related Reddit games are a clear example. Investors shouldn’t jump into an already-advanced stock or asset without worrying about what they’re buying in the first place. CAN SLIM invest It’s about buying the right stocks – with strong fundamentals and new products or services – at the right time when the chance of success is greatest.
At the right time, the market definitely belongs, the M in CAN SLIM. It’s a confirmed stock market rally so investors can still make new purchases. However, given the red flags, they should be cautious when it comes to adding exposure and should consider taking profits on expanded stocks and cutting back latecomers.
Read The big picture every day to stay in sync with market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
YOU MAY ALSO LIKE: