A day after the market staged a fresh follow-through day Friday, the major indexes added gains in stocks today. Big-cap stocks and some technology leaders outperformed as the Nasdaq composite rallied more than 1%, stretching its year-to-date advance to 17.7%. The Nasdaq 100 rose 1.1%.
XChips and software in particular showed robust gains. This month, watch to see if the top stocks in these key industries continue to outpace the major indexes.
The Dow Jones Industrial Average lost a majority of its morning rally. After rising as much as 0.8%, the 30-stock blue-chip index closed up just 0.3%. That's quite less than the 0.6% gain by the Russell 2000.
Volume edged mildly higher on both the Nasdaq and the NYSE, according to early data.
As noted in The Big Picture, the Nasdaq on Friday staged a new follow-through day, which marks a potential new uptrend underway, in the fifth day of a new rally attempt. The new rally followed an 11% correction by the tech-rich composite.
This follows a Jan. 4 Day 7 follow-through, confirming heavy institutional buying, in the S&P 500. At that time, the 500 finished the Jan. 4 session at 2531. On Monday, the large-cap benchmark finished nearly 0.5% higher at 2887.
The Dow Jones transports rose 0.9%; at one point, it gained more than 1.4%. Innovator IBD 50 (FFTY) outperformed most equity indexes, rising 1%. The exchange traded fund also rose back above its 50-day moving average, a bullish sign.
Beyond Dow Jones Industrials: 5 Key Growth Stocks
Leading growth stocks including MercadoLibre (MELI), Advanced Micro Devices (AMD), ServiceNow (NOW), Atlassian (TEAM) and Upland Software (UPLD) reflected heavy demand for high-growth companies.
MercadoLibre, on top of last week's nearly 6% advance, lifted 2% higher on Monday. It's cleared an ascending base with a 612.06 proper buy point.
All of the above stocks, except Atlassian, hold a spot in IBD Leaderboard. But Atlassian is also a Sector Leader; these stocks also get annotations on their daily and weekly charts to help readers identify a key buy point or important sell rule.
Going into Monday's rally, Leaderboard stocks showed a portfolio-weighted gain of 18.7% since Jan. 1 vs up 14.6% for the S&P 500 excluding dividends. In the Leaderboard portfolio, a full-size position takes up one-eighth of an all-cash account devoted to growth stocks; a half position takes up one-sixteenth.
The Software sector, which had held the No. 1 spot among 33 sectors showcased in IBD's stock tables, currently ranks No. 2 for mid- and long-range price performance. See the entire list daily at IBD Data Tables in the Stock Lists section of Investors.com. IBD research finds that up to half of a true market leader's performance is directly linked to the action of its particular industry group and the broader sector.
Upland Software crossed past a 50.74 entry point in a rare ascending base.
Chips ranks No. 20 out of 33 sectors, but held a respectable 15% price-weighted gain since Jan. 1 through the start of Monday trading.
A New Base And Breakout For Upland Software, Advanced Micro
Advanced Micro Devices (AMD) cleared a 30.05 correct buy point last week in fast turnover. On Monday, shares of the chipmaking giant backed off their intraday high of 34.30, yet still gained 2.5% in hefty turnover. AMD has now gained as much as 14% after its Thursday breakout.
AMD is a classic fundamentals turnaround. In 2017, it ended two years of red ink with a profit of 10 cents per share, then boosted the bottom line 360% to 46 cents a share last year. Analysts surveyed by Refinitiv see earnings climbing 39% this year to 64 cents a share and up 58% to $1.01 in 2020.
IBD Stock Checkup shows AMD having a decent but not great 82 Composite Rating on a scale of 1 to 99. It ranks seventh in this score within the fabless semiconductor industry group. But the 98 Relative Strength Rating is second best within the group, below Lattice Semiconductor (LSCC).
M&A Buzz In This Software Group
Salesforce.com (CRM) fell hard on news that it's acquiring data analytics software pioneer and database play Tableau Software (DATA), which soared 34% in huge turnover. But Big Data rival Splunk (SPLK) enjoyed a muscular gain, rising more than 6%. The stock retook its long-term 200-day moving average. Watch for a new base to form.
Kirkland Lake Gold (KL) had a wild session, losing more than 4% early before reversing higher. The stock is rising out of the 5% buy zone after a breakout past a 35.30 entry in a cup with handle.
Kirkland ranks No. 1 within the IBD 50.
On the downside, NLight (LASR) fell more than 4% intraday and hit a session low of 18.27. It pared the loss to 1.6% by the close. Volume jumped twice its 50-day average. The 2018 IPO is trying to bottom out and form a new base after rallying 62% in a five-month advance that began in December.
NLight got highlighted in the down-in-price section of IBD Stocks On The Move.
The Macro Picture
President Trump's tweet over the weekend helped defuse, for now, the possibility of a brand-new trade war, this time between the U.S. and key economic partner Mexico.
The U.S. had been set to slap a 5% tariff on all Mexican imports, from fruits and vegetables to automobiles.
Meanwhile, some market observers offered other reasons why equities appear poised to provide a respectable return in 2019.
"U.S. households, representing two-thirds of the economy, will remain the powerhouse driving steady growth," Christopher Smart, head of the Barings Investment Institute, wrote in a Monday note titled "The Coming Melt Up: Or At Least What You Need To Believe For It To Come True" to clients. "Certainly, slightly higher prices from tariffs on imports from China aren't going to be enough to knock it off course."
Smart, a former deputy assistant secretary at the U.S. Treasury and an economic policy expert at the White House, acknowledged the worries over high amounts of student and auto loans, yet believes "overall household balance sheets look solid."
The current "noise" on trade policy won't have a sharp immediate impact on corporate earnings this year. But "the real impact from the uncertainty around trade policy will play out far beyond this year as firms delay their capital expenditures until the dust settles a little more," Smart added.
Please follow Chung on Twitter at both @SaitoChung and @IBD_DChung for more on growth stocks, breakouts and chart analysis.
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