Dow Jones futures fell solidly Tuesday morning, along with S&P 500 futures and Nasdaq futures, after U.S. stock markets were closed for the Martin Luther King holiday. The stock market rally powered higher last week, with the Dow Jones, S&P 500 index and Nasdaq composite all reclaiming their 50-day lines. Microsoft (MSFT), Netflix (NFLX), Adobe (ADBE), Salesforce.com (CRM) and Visa (V) are large-cap stock worth watching. Microsoft stock, Adobe stock, Salesforce stock and Visa stock are all within 5% of proper buy points. Netflix stock, which sold off Friday on mixed results and weak guidance, is well below a current buy point but seems poised to carve a new, lower entry.
XAll five stocks have market caps above $100 billion. Microsoft stock, with an $826 billion valuation, is just below Amazon.com (AMZN) at $829 billion for the market cap crown. Adobe and Salesforce stock boast best-possible IBD Composite Ratings of 99. Microsoft stock, Netflix stock and Visa stock all have 96 Composite Ratings.
Dow Jones Futures Today
Dow Jones futures fell 0.5% vs. fair value, off overnight lows somewhat. S&P 500 futures retreated 0.55%. Nasdaq 100 futures lost 0.8%. Remember that Dow futures and other overnight action don't necessarily translate in actual trading in the next regular session.
Asian markets were down in Tuesday trading after largely advancing Monday.
Stock Market Rally
The stock market rally looks healthy, with the the major averages clearing key resistance last week on hopes for a China trade deal. It's still unclear if this stock market rally is just a short-term tradable rally or the start of a significant uptrend beyond the 2018 highs. The next key test will be getting above the 200-day line. The Dow Jones is not far from this long-term level, followed by the S&P 500 and Nasdaq. The Nasdaq's 200-day line is currently around the tech index's Dec. 3 peak, which would be another test.
But what this stock market rally really needs is more top stocks breaking out into buy zones. More continue to do so, but it's been a slowly increasing drip rather than a flood. Dozens of top stocks are piling up near buy points, so investors should keep a close watch.
Earnings season is heating up. Here's a rundown on key corporate earnings and other market-moving events this week.
Netflix Stock
Let's get Netflix out of the way first. Netflix stock is currently 19% below its June 21 record high of 423.20. It's 12% off its Oct. 2 peak, which could be interpreted as the start of a new cup base. However, Netflix appears to be making a handle right. A handle must must be flat to downward sloping and be at least five days long, shaking out weak holders. Netflix's proto handle is just 3 days long after Friday's 4% retreat. If Netflix stock holds in its current range — which is by no means assured as investors continue to digest the company's earnings and guidance — it will have a proper handle as of Wednesday's close with a buy point of 358.95.
This handle would be above the midpoint of the Netflix stock consolidation, using either the June 21 or Oct. 2 peak as the left side.
The relative strength line, which tracks a stock's performance vs. the S&P 500 index, recently hit a six-month high.
Microsoft Stock
Microsoft stock had a failed breakout from a double-bottom base on Dec. 3, then plunged with the broader market through Dec. 24. During the sell-off, the RS line held in record territory, as Microsoft stock fell less than the S&P 500 index. But in the stock market rally, the Dow Jones tech giant has lagged slightly, though shares rose 4.8% last week to reclaim their 200-day and 50-day lines.
Microsoft stock is now 5% below a 113.52 buy point from a cup base starting on Dec. 3. Shares are 7% below the 116.18 all-time high from Oct. 3.
Salesforce Stock
Salesforce stock bottomed on Nov. 20 and didn't come close to undercutting that level during the December market plunge. So the software giant's RS line has been climbing, hitting new highs in the past couple of weeks. Salesforce stock reclaimed its 50-day and 200-day lines on the S&P 500 follow-through day on Jan. 4, then decisively moved above a key resistance area last week. Shares are now 5% below a 161.29 buy point in a consolidation going back to Oct. 1.
Adobe Stock
Adobe stock is working on a double-bottom base with a 260.82 buy point. The RS line is trading right around highs, but has been moving sideways since the end of May. Adobe stock decisively moved above its 50-day line last week and reclaimed its 200-day on Friday. Shares are 5% below the entry.
Visa Stock
Visa stock, like Microsoft stock, staged a failed double-bottom breakout attempt on Dec. 3., then tumbled to an eight-month low by Dec. 24. But the RS line slowly moved ever higher, and continued to advance in the early part of the stock market rally. Visa stock has been consolidating just above its 50-day and 200-day moving averages for the past couple of weeks. The Dow Jones financial giant now has a handle buy point of 139.58 within a consolidation going back to Dec. 3.
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