Dow Jones futures are set to commence trading on Sunday evening, alongside S&P 500 futures and Nasdaq futures. Notably, Nvidia and various AI chip companies are in the process of forming bases.
The previous week witnessed a market retreat, characterized by a significant downside reversal on Thursday that shifted the uptrend to a state of being “under pressure.” However, there was a rebound in the major indexes on Friday. While some leaders displayed buy signals, false signals also persisted. Many stocks are either nearing early entry points or are in the process of forming new consolidations.
Investors are advised to closely monitor the market and cautiously consider incremental purchases, given the current range-bound market conditions.
Nvidia (NVDA) experienced a decline last week but is on the verge of establishing a new base. Similarly, Broadcom (AVGO), Taiwan Semiconductor (TSM), and the recent IPO Astera Labs (ALAB) are also in the process of potentially forming bases. Meanwhile, ARM Holdings (ARM) has already established a base. Super Micro Computer (SMCI), closely linked to AI chips, is also in the process of forming a base.
Tesla (TSLA) faced a setback following weak first-quarter deliveries and other negative news. However, the stock surged on Friday night after Elon Musk announced that Tesla would introduce a robotaxi on Aug. 8.
Nvidia and ARM stock are featured on IBD Leaderboard. Nvidia stock and Arm Holdings are part of the IBD 50. Nvidia, Broadcom, and Super Micro stock are included in the IBD Big Cap 20.
Dow Jones Futures Outlook
Dow Jones futures will open at 6 p.m. ET on Sunday, alongside S&P 500 futures and Nasdaq 100 futures.
It’s important to note that overnight movements in Dow futures and other indices may not necessarily translate directly to the subsequent regular stock market session.
Market Performance
The stock market experienced moderate to solid losses last week but concluded on a positive note on Friday.
The Dow Jones Industrial Average declined by 2.3% during the week’s trading sessions but managed to reclaim the 50-day line on Friday. The S&P 500 index dropped by 0.95%, and the Nasdaq composite saw a decrease of 0.8%. However, both indices closed above their 21-day lines by the end of the week. On the other hand, the small-cap Russell 2000 fell by 2.9% and failed to close above its 21-day line on Friday.
Despite a sharp downside reversal due to Mideast tensions on Thursday, stocks rebounded on Friday, even in the presence of positive jobs data, possibly indicating a reduction in Mideast-related concerns.
While the Nasdaq has been trading relatively steadily since early March, finding support at the 10-week line, the Russell 2000 is situated around the top of a consolidation phase since late 2023. This environment has allowed many leading stocks to either form bases or retrace to crucial support levels. Several leaders attempted to break out during the week, although many retraced quickly.
The 10-year Treasury yield surged by 18.5 basis points to reach 4.38%, marking the highest close of 2024. U.S. crude oil futures also experienced a significant increase, reaching $86.91 per barrel for the week, the highest levels since October.
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ETF Performance
Within the realm of growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) declined by 1.3% last week. The VanEck Vectors Semiconductor ETF (SMH) also saw a 1% decrease. Notably, Nvidia is a substantial holding within SMH, with Broadcom and Taiwan Semiconductor also being key components.
The SPDR S&P Metals & Mining ETF (XME) surged by 2.9% during the week, while the Global X U.S. Infrastructure Development ETF (PAVE) experienced a slight dip of 0.2%. Conversely, the U.S. Global Jets ETF (JETS) fell by 4.2%, and the SPDR S&P Homebuilders ETF (XHB) retreated by 2.7%.
The Energy Select SPDR ETF (XLE) witnessed a notable increase of 3.9%, whereas the Health Care Select Sector SPDR Fund (XLV) saw a modest decline of just over 3%. The Industrial Select Sector SPDR Fund (XLI) slipped by 0.2%, and the Financial Select SPDR ETF (XLF) declined by 1.3%.
In the realm of speculative story stocks, the ARK Innovation ETF (ARKK) faced a significant sell-off of 5.9% last week, while the ARK Genomics ETF (ARKG) plunged by 7.1%. Tesla stock holds a prominent position across Ark Invest’s ETFs.
Utilize IBD’s ETF Market Strategy for Market Timing
Nvidia Stock Analysis
Nvidia stock experienced a 2.6% decline, closing at 880.08, marking a second consecutive weekly drop following a substantial 11-week rally. However, shares rebounded on Friday, closing slightly above the 21-day line. The leading AI chip company is currently in the fourth week of a potential flat base formation. The buy point is set at 974, representing the high point of NVDA stock’s significant reversal on March 8. Another week could see the rapidly ascending 10-week line bridging the gap significantly.
An early entry point could be identified at Thursday’s high of 906.34 from a very short trendline.
The emergence of a new base could provide investors with an opportunity to partake in or add to their positions in the primary player in the AI stock market rally. A breakout by Nvidia could have a substantial impact on the broader market, particularly on other AI chip stocks.
Insights from Mike Webster on Holding SMCI Stock
AI Chip Sector Overview
Broadcom stock rose by 1.1% to reach 1,339.43 last week, maintaining the 21-day line and rebounding from the 10-week line once again. On Thursday, AVGO stock briefly surpassed a downward-sloping trendline before reversing course. The stock is currently five weeks into a potential base with a prospective entry point at 1,438.17. Investors could utilize Thursday’s intraday high of 1,403.98 as an early entry.
ARM stock saw a marginal decline of 0.1% to 124.82 for the week, finding support at the 10-week line but facing resistance at the 21-day line. The stock has established a base with a buy point at 164. However, a downward-sloping trendline or the March 26 high of 145 could serve as initial entry points.
Taiwan Semiconductor stock increased by 1.2% to 141.37, finding support at the 21-day line. The semiconductor giant, which manufactures chips for Nvidia, Apple (AAPL), and various other companies, is a few weeks into a potential base. Investors might consider using Thursday’s high of 146.75 as an early entry point.
Taiwan Semi is scheduled to report March sales on April 10, with Q1 earnings slated for April 18. These events could significantly impact AI chip manufacturers and chip equipment providers.
Astera Labs stock declined by 3.8% to 71.34 last week but saw an upturn on Friday. The AI networking chipmaker, which commenced trading on March 20 and reached a record high of 95.21 on March 26, is currently eight days into a potential IPO base, which could last between two weeks to ten days. The buy point is set at 95.21, although investors might explore early entry points, with the 75 region serving as a resistance level.
Super Micro stock, although not a direct AI chip player, is closely associated with AI chips due to its servers being a preferred platform for chips from Nvidia and other companies. SMCI stock experienced a 6.1% decline to 948.02 last week, falling below the 21-day line. A test of the 10-week line might be imminent, as Super Micro stock is on the brink of forming a new base. Investors could consider Thursday’s high of 1,057.18 as a potential early entry point.
Astera Labs Shines in AI Networking Chip Sector
Tesla Stock Analysis
Tesla stock dropped by 6.2% to 164.90 last week, once again moving away from the 10-week moving average. The stock briefly reached an 11-month low on Friday.
The electric vehicle giant reported first-quarter deliveries that significantly undershot even the most pessimistic estimates on Tuesday. Additionally, Reuters indicated on Friday that Tesla is abandoning plans for a $25,000 EV, refocusing its efforts on a robotaxi devoid of a steering wheel.
If accurate, this development implies that Elon Musk is placing substantial emphasis on autonomous driving for Tesla’s future growth.
In response to the Reuters report, Musk stated on his social platform X that “Reuters is lying (again).” However, he did not specify the inaccuracies in the report.
Late on Friday, Musk announced that Tesla would unveil a robotaxi on Aug. 8, without providing further details such as whether it would be a prototype, a design reveal, or just an image presentation.
It’s important to note that Tesla’s Full Self-Driving system is currently classified as a Level 2 system, necessitating human drivers to be prepared to take control of the vehicle.
Despite these developments, TSLA stock surged by 3.8% after the market close.
Strategic Considerations
The stock market is currently in a consolidation phase, with moving averages narrowing. While this could potentially set the stage for another upswing, there are no guarantees of immediate or sustained growth.
During this period of sideways movement, navigating the market has been challenging, with many leading stocks approaching buy points only to retreat swiftly. While investors may have attempted some purchases, they likely had to exit many positions.
With Treasury yields reaching 2024 highs and the market signaling a reluctance towards Fed rate cuts, potential headwinds may impact the ongoing market rally.
Investors are advised to await more robust market strength, such as the Nasdaq and S&P 500 surpassing Thursday’s intraday highs and testing all-time highs before significantly increasing their market exposure.
A broad market movement of this nature could catalyze the performance of Nvidia, ARM, and other AI chip leaders.
It is crucial to maintain updated watchlists and identify emerging setups. While this article primarily focused on AI chip plays, numerous software stocks are displaying potential entry points, alongside leading stocks from various sectors.
For daily market insights and updates on leading stocks and sectors, refer to The Big Picture.
For real-time stock market updates and more, follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson. YOU MIGHT ALSO LIKE:
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