Dow Jones futures rose solidly Monday morning, along with S&P 500 futures and Nasdaq futures, as President Donald Trump signed the stimulus deal Sunday night.
The stock market rally had a steady preholiday week, with the major indexes and growth names trading tightly. Over Christmas weekend, Bitcoin continued its wild ride, while Elon Musk said Tesla (TSLA) must go “all out” in the next few days to reach the “historic milestone” of 500,000 deliveries in 2020.
There’s more progress on the coronavirus vaccine front, while China ordered Alibaba (BABA) affiliate Ant Group to focus on payments.
Trump Signs Stimulus Deal
Shortly after Dow futures started trading, President Trump tweeted, “Good news on Covid Relief Bill. Information to follow!”
Trump signed the combined $900 billion stimulus deal and $1.4 trillion omnibus spending legislation Sunday night, after threatening for several days to block it.
What did the president get in return? House Democrats plan to vote Monday on a bill to increase the stimulus deal’s direct checks to $2,000, up from $600. That was one of President Trump’s objections to the stimulus deal.
Trump, in a statement, said that the GOP-held Senate will hold a vote on raising the direct checks to $2,000. He also said that Congress will vote on repealing Section 230 that provides liability protection to internet companies as well as investigate his claims of voter fraud. It’s not clear what will happen on those fronts.
Apple Stock, Tech Giants In Buy Zones
Among the megacap stocks, Apple (AAPL) is performing the best, with big recent gains; it’s running through several early buy points and toward record highs. But Microsoft stock is starting to gain momentum and tripping some early buy signals.
Among the mere large-cap techs, Adobe stock is flashing some early buy signals as well. TSM stock is in a tight pattern at record highs, signaling an early entry on Christmas Eve. Qualcomm stock is finding support at the 21-day exponential moving average and just above its 10-week line.
Dow Jones Futures Today
Dow Jones futures rose 0.6% vs. fair value, turning higher Sunday on President Trump’s Covid relief tweet and stimulus deal signing. S&P 500 futures climbed 0.7%. Nasdaq 100 futures advanced 0.75%.
Bitcoin soaring above $25,000, $26,000 and $27,000 for the first time on Saturday. The Bitcoin price topped $28,000 early Sunday before retreating to about $27,000. Bitcoin-related stock plays also rose.
China Orders Ant Group To Scale Back
Chinese regulators ordered Ant Group “rectify” its expansion into consumer lending, wealth management and other lucrative businesses and focus on its core payments operations. The Alibaba affiliate met over the weekend with financial regulators, who told Ant Group to set up a timetable for compliance. Last month, regulators suspended the Ant Group IPO just before it was due to launch on the Hong Kong and Singapore exchanges.
On Thursday, anti-monopoly regulators opened a probe vs. Alibaba, which plunged 13%. Archrival Tencent (TCEHY), which also has a vast internet platform with a major payments operation, sank 5.3%. JD.com (JD), an Alibaba e-commerce rival with a Tencent alliance, dipped 1%. Pinduoduo (PDD) leapt 8.9% on hopes that the Alibaba probe will be positive for China’s No. 3 e-commerce operator.
Alibaba raised its planned BABA stock buyback to $10 billion from $6 billion.
Alibaba fell 1% early Monday. JD.com retreated slightly. PDD stock was little changed.
Coronavirus Vaccine News
The AstraZeneca and Oxford coronavirus vaccine is likely to win U.K. approval this week. AstraZeneca (AZN) CEO Pascal Soriot said Sunday that new data will show that the vaccine is as effective as the Pfizer and Moderna (MRNA) immunizations, protecting roughly 95% of patients. Further, the vaccine is 100% effective at preventing serious Covid cases, he added, something the Moderna vaccine also has shown.
Prior studies showed the AstraZeneca vaccine to be 70% effective, on average, but Soriot told the U.K.’s Sunday Times that “we have figured out the winning formula” in terms of doses, but didn’t provide more details.
The AstraZeneca vaccine is far easier and cheaper to make the mRNA-based Pfizer and Moderna vaccines, especially crucial for developing nations.
AstraZeneca stock rose 4% in the premarket. Pfizer rose slightly, but BioNTech and Moderna fell.
Coronavirus cases worldwide reached 81.21 million. Covid-19 deaths topped 1.77 million.
Coronavirus cases in the U.S. have hit 19.57 million, with deaths above 341,000.
New Covid cases in the U.S. appear to be trending lower from record highs over the past several days. But hospitalizations are high, with hospitals in hard-hit LA at full capacity in ICUs.
Reported cases are down sharply in the past few days, and that’ll likely continue through the New Year’s Day weekend, as fewer people are tested.
Stock Market Rally
U.S. Stock Market Today Overview
Last Update: 1:20 PM ET 12/24/2020
The stock market rally had a relatively quiet week, with the major indexes holding right at record highs.
The Dow Jones Industrial Average edged up 0.1% in last week’s stock market trading. The S&P 500 index dipped 0.2%. The Nasdaq composite climbed 0.4%. The Dow Jones and S&P 500 rebounded from tests of the 21-day lines. All the major indexes had a closing range above 80%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) dipped 0.3% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) rallied 1.4%. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 0.4%. The VanEck Vectors Semiconductor ETF (SMH) lost just over 1%, even with No. 1 holding TSM stock up for an eighth straight week.
Tesla Deliveries ‘Historic Milestone’ In Reach
Tesla CEO Elon Musk said the electric car maker still has a shot of reaching the “historic milestone” of 500,000 deliveries in 2020, but must go “all out” in the last few days of the year. That’s according to another “leaked” email from Musk to employees.
To reach 500,000, Tesla deliveries must hit 181,000 in the fourth quarter, blowing out the third quarter’s record by more than 40,000. The odds of Tesla reaching the mark got a big boost with a huge jump in China sales last month. Musk saying that 500,000 is in sight will certainly raise expectations that Tesla will indeed achieve that mark.
Tesla has been reporting quarterly production and delivery figures within the first three business days of the next quarter for several years. Jan. 3 is a Sunday, while the third business day isn’t until Jan. 6.
Shares edged higher early Monday.
Tesla stock fell 4.8% last week to 661.77, but closed near the top of its weekly range. That followed a 70% run over the prior month on news that TSLA stock would join the S&P 500 index. That was capped off with a right-at-the-close surge to a record 695 on Dec. 18.
Tesla stock, which boasts a $627 billion market cap, does not have a proper buy point.
Apple stock rose 4.15% last week to 131.91, after a 3.5% gain in the prior week. It’s up 10.8% so far in December.
Shares have moved past several early entries in the past several weeks, notably a 125.49 mark on Dec. 15. For now, AAPL stock has a 138.04 official buy point, according to MarketSmith analysis, though a handle around current levels might be ideal.
The relative strength line for AAPL stock is rebounding, moving closer to record highs after slumping for a few months. That followed a long RS line uptrend from January 2019. The RS line, the blue line in the charts provided, track a stock’s performance vs. the S&P 500 index.
Apple stock has a world-beating $2.24 trillion market valuation.
Microsoft stock climbed 1.9% to 222.69 last week after a 2.5% rally in the prior week. So far this month MSFT stock is up 4%.
Microsoft stock rebounded from its 50-day line on Dec. 16, offering a place to nibble at this tech giant. It followed up with another solid gain on Dec. 21. It’s currently just 3.4% above its 10-week line, well within range of buying off that level.
Shares are just below a downward-sloping trend line starting with the Sept. 2 peak of 232.86. Investors also could use 228.22 as another early entry, with 232.96 as the official buy point.
Microsoft is trying to follow Apple stock, but so far with less power. That’s evident in the RS line
The RS line for MSFT stock has picked up over the past couple of weeks, but is off its early-November peak and especially its early-July all-time high. Investors might not want to take a big position in Microsoft stock until it shows more strength, though its recent lull followed a multiyear run of outperforming the broader market.
Microsoft has a $1.68 trillion market cap.
Adobe stock fell 1% last week to 498.14, but that followed a 5.7% jump in the prior week. It’s up 4.1% in December.
ADBE stock reclaimed its 50-day/10-week line earlier this month, but provided its first decent early entry on Dec. 18, when it broke a downward-sloping trend line and cleared very short-term resistance around 500. Since then shares have been consolidating, perhaps starting a handle. Another possible buying opportunity is 519.70. Investors could treat that as an early entry or an “official” double-bottom buy point. Another entry is 536.98, 10 cents above the record high.
The RS line for ADBE stock has improved over the past five weeks, but still has a ways to go before reaching record highs.
Adobe stock has a $239 billion market cap.
TSM stock edged up 1.5% to 105.87 last week after a 0.2% gain in the prior week.
TSM stock has a three-weeks-tight pattern. (It’s almost a four-weeks-tight, but last week’s unrounded gain of 1.52% is just past the 1.5% maximum weekly move in a tight pattern.) The official buy point is 107.94. However, aggressive investors could have used Thursday’s 2% pop as an early entry.
The RS line for TSM stock is right at record highs.
Traditionally, Taiwan Semi stock has been a slower mover, but in recent months it’s spent a lot of time significantly above its 10-week line. Even after its recent tight action, TSM stock is still 9.3% above its 10-week.
But perhaps this recent strong performance is justified. The chip cycle is on the upswing. The Apple iPhone cycle, with the first 5G model, is also on the upswing. Finally, Taiwan Semiconductor has a technological edge over rivals such as Intel (INTC) and Samsung Electronics.
TSM stock has a $549 billion market cap, by far the biggest of any U.S.-traded chipmaker.
Qualcomm stock climbed 1% to 148.90 last week after a 2.2% advance in the prior week. For the month, QCOM stock is up only 1.2%, thanks to an 8.5% tumble in the week ended Dec. 11.
On a daily chart, Qualcomm stock is finding support at the 21-day line. On a weekly chart, QCOM stock has been finding support just above its 10-week line for the past three weeks. A strong bounce from current levels could offer an opportunity to start a position as the wireless chipmaker forges a new base.
The RS line is not far from recent record highs.
As a 5G player and Apple iPhone chipmaker, Qualcomm is well-positioned for growth. However, shares plunged earlier this month on a report that Apple is looking to make iPhone modem chips in house, cutting out Qualcomm.
Qualcomm stock has a $168.4 billion market cap.
You can read about more about Qualcomm in this Swing Trading column.
Stock Market Rally Analysis
The recent sideways action for the stock market rally is about ideal. The pause allows moving averages to catch up a bit, lowering the odds of a sharp pullback.
It’s also letting leading stocks set up, such as forming handles or tight patterns or finding support at key levels. Speaking of tight action, while the Nasdaq has trended higher, the S&P 500 index and Dow Jones now have four-weeks-tight patterns.
For growth stocks that have made solid advances in recent weeks, such as Apple stock and Taiwan Semi, that really shows up in the RS line with the market going sideways.
What To Do Now
With the stock market rally trending flat to slightly higher, both in the major indexes and leaders, the risks of growth names being greatly extended are a little less likely. But you should analyze your holdings individual and as a whole.
Look for stocks setting up, either in bases, tight patterns or at key support.
You want to be concentrated in leading stocks, but it’s still a good idea to have diversity among your leaders. You don’t want to be all in cloud software or chips or IPOs. Further, you may want a mix of coronavirus plays, post-pandemic names and stocks that don’t seem affected either way. IBD Live had an extended concentration and diversification discussion in Thursday’s show.
Finally, with the end of the year looming, tax considerations can play a factor. If you’re looking to take some profits, you might choose to wait until the new year. Likewise, if you’re on the fence on whether to cut a stock that’s a slight loser, you might choose to do so in this coming week.
But treat taxes as a secondary indicator vs. “primary” buy or sell rules, much like psychological market indicators are secondary to the primary gauges of the major indexes and leading stocks. Ultimately, you’re going to have to pay the IRS.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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