After a period of time, Dow Jones, S&P 500, and Nasdaq futures all experienced slight increases. Concurrently, President Joe Biden is scheduled to meet with President Xi Jinping of China, while significant developments in Microsoft’s (MSFT) artificial intelligence sector are expected to be unveiled on Wednesday.
Following a cooler-than-expected October CPI inflation report that led to a sharp decline in Treasury yields, the stock market witnessed substantial gains on Tuesday.
Several stocks, including MercadoLibre (MELI), Cloudflare (NET), Amazon.com (AMZN), Super Micro Computer (SMCI), and Toll Brothers (TOL), displayed notable growth or buy signals. They joined the likes of Nvidia and Microsoft, which saw an uptick in their shares on Tuesday within the buying zones.
The value of Tesla’s assets continued to rise steadily as it approached its 50-day milestone. Tuesday also saw significant activity from Tesla’s (TSLA) competitor, BYD.
Biden-Xi Meeting and Microsoft AI News
During the Ignite 2023 event on Wednesday, Microsoft is set to showcase its latest advancements in AI technology. Speculation suggests that Microsoft may introduce its own AI chip to reduce its dependency on Nvidia (NVDA), which had unveiled a new AI device earlier this year.
Meanwhile, Biden and Xi convened outside San Francisco’s monthly APEC event. There is uncertainty regarding whether the meeting will provide clarity on easing U.S.-China tensions. China is expected to lift the ban on Boeing (BA) 737 Max sales to Chinese airlines.
Amazon, Microsoft, and Nvidia shares are featured on the IBD Leaderboard, while MercadoLibre and Amazon assets are highlighted on SwingTrader. MSFT shares are included in the IBD Long-Term Leaders list. Microsoft, Nvidia, and MELI investments are all part of the IBD 50.
Cloudflare was named Tuesday’s IBD Stock Of The Day. Last year, MELI and Nvidia stocks were selected for this recognition.
The video accompanying the article analyzed DraftKings (DKNG), Super Micro Computer, TOL stock, and the significant market rally on Tuesday.
Current Dow Jones Futures
Dow Jones futures rose by 0.2% from fair value. Nasdaq 100 futures increased by 0.15%, and S&P 500 Futures saw a 0.1% rise, as reported by S&P.
At 8:30 a.m. ET, buyers can expect the release of the October producer price index and October financial profits.
To avert a government shutdown until early 2024, the House passed a short-term funding bill on Tuesday evening with broad bipartisan support. The Senate is expected to swiftly approve the measure.
It is important to note that trading in Dow futures and other markets overnight does not always translate into actual trading during the subsequent regular stock market session.
Earnings Updates
Following the announcement of in-line Q3 revenue and profits slightly exceeding expectations by Warren Buffett-backed Brazilian fintech firm Nu Holdings (NU), the industry saw a modest decline in NU stock. On Tuesday, shares surged by 4.5% to 8.83, reaching a 20-month high and moving out of the purchase zone.
Berkshire Hathaway (BKRB) will soon disclose its Q3 stock holdings, including any new positions.
Early on Wednesday, TJX Cos., XPeng, and Target (TGT) are scheduled to report earnings. TJX stock is nearing a purchase point and may present a viable opportunity. XPEV shares are on the cusp of a significant entry point. TGT stock is experiencing a prolonged downtrend, while its competitor, Walmart (WMT), which is set to report on Thursday, is currently on an upward trend.
Stock Market Rally
The stock market rally made significant gains on Tuesday following the subdued October CPI report.
The Dow Jones Industrial Average surged by 1.4% in Tuesday’s trading session. The S&P 500 index rose by 1.9%, and the Nasdaq composite climbed by 2.4%, surpassing the 14,000 mark.
The Invesco S&P 500 Equal Weight ETF (RSP) and the small-cap Russell 2000 both closed up by 5.4% and 2.85%, respectively. Although still below their 200-day averages, both surpassed their 50-day moving averages.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) rose by 2.9%, surpassing its October highs and decisively moving above its 50-day mark. The Nasdaq 100 surged by 2.15%, reaching its 52-week high in July.
The Nasdaq composite as a whole approached the 14,000 level, nearing its short-term high from September 1st, aligning closely with the trendline reaching its all-time high in November 2021.
With multiple sectors showing strong performance or buy signals, leading stocks enjoyed a fruitful day.
Given the significant gains since late October, a substantial pullback in major indexes and top stocks would not be unexpected. However, the overall outlook has been largely positive.
The 10-year Treasury yield dropped by 19 basis points to 4.44%, marking its lowest level since late September. The current market sentiment leans towards a higher probability of a rate cut in May rather than additional Fed rate hikes.
U.S. crude oil prices remained unchanged at $78.26 per barrel.
ETF Performance
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) rose by 2.7%. Microsoft assets hold significant weight in the IGV portfolio. The VanEck Vectors Semiconductor ETF (SMH) saw a slight increase of just over 3%, with NVDA stock being the largest component.
The ARK Innovation ETF (ARKK) surged by 5.1%, focusing on stocks with more speculative narratives, while the ARK Genomics ETP (+ARKG) soared by 8.85%. Tesla assets are prominent holdings in Ark Invest’s ETFs. Cathie Wood also holds positions in MELI stock, Cloudflare, and BYD.
The P Metals & Mining ETF (XME) and SPDR S&P Metals & Mining ETF both rose by 5.1%. The SPDR S&P Homebuilders ETF (XHB) increased by 5.9% and welcomed TOL stock as a member. The Health Care Select Sector SPDR Fund (XLV) rose by 0.7%, while the Energy Select SPDR ETF (+XLE) climbed by 0.9%.
The Financial Select SPDR ETF (XLF) increased by 1.9%, while the Industrial Select Sector SPDR Fund (XLI) gained 2%.
Stocks in Buying Zones
A buy point of 1,398.59 was established from a cup-with-handle base as MELI assets rose by 3.8% to 1,430.51. However, stocks retreated significantly from their intraday peaks of 1,466.92.
NET assets surged by 10.5% to 70.61. The securities are still distant from the consolidation buy point of 76.07. Nonetheless, Cloudflare assets overcame resistance at 66 and an upward-trending pattern. Investors may have considered 66.24 as an early entry point.
Amazon assets rose by 2.25% to 145.80, testing a buy point of 142.86. The stocks had previously cleared an early entry point of 134.48 on November 1.
According to MarketSmith analysis, TOL stock increased by 8% to 85.98, surpassing the 82.39 cup-with-handle buy point. Despite the decline in Treasury yields, Toll Brothers and other related stocks displayed strong performance.
After crossing the 50-day mark and approaching several initial entry points between 287 and 295, SMCI stock skyrocketed by 14.9% to 293.87. The double-bottom buy point for Super Micro stock stands at 317.50.
MSFT assets rose by 1% to $370.27, remaining within the cup-base buy point range of 366.78. However, the stocks have exceeded the 50-day mark. Microsoft assets had presented initial entry opportunities at the start of the month.
Nvidia stock surged by 2.1% to 496.56, marking its tenth consecutive gain and reaching a record high. The stocks are rising from a double-bottom base within the buy zone. Nvidia’s earnings report is scheduled for November 21, coinciding with Microsoft’s AI updates on Wednesday.
Tesla Stock
Following a 4.2% increase on Monday to reclaim the 200-day line, Tesla stock rose by 6.1% to 237.41 on Tuesday, nearing the 50-day mark. With a buy level of 278.98, TSLA assets may be forming the right side of a double-bottom pattern. An upward-trending trendline above 255 may offer an early entry opportunity.
After a slight increase in the prices of the base Model 3 and Y in China, Tesla’s vehicle deliveries outperformed the industry. This development could bolster investor confidence. Despite the commencement of Model 3 shipments from Giga Shanghai, standard registrations in China have yet to match Q3 levels.
In parallel, BYD stock rose by 2.7% to 31.96, surpassing its 50-day high and breaching a trendline entry. With an official buy point of 36.27, the Chinese EV and energy giant faces additional short-term resistance at 32.76.
Next Steps
The market continues to signal an opportunity for increased exposure. Major indexes are on the rise, market breadth is expanding, and numerous top stocks are displaying buy signals.
If you have been gradually increasing your exposure since November 1, you may have already realized significant gains and should consider maintaining a substantial investment position.
In the event of a market pullback or prolonged pause, such a strategy could help protect investors.
Continue to monitor your watchlists and review your portfolio. Look for strong performers to potentially add to your holdings and consider scaling out of underperforming assets.
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