Dow Jones futures open Sunday afternoon, along with S&P 500 futures and Nasdaq futures. Tesla (TSLA) launched a subscription option for its “Full Self-Driving” driver assistance program as an alternative to paying a large fee upfront. An OPEC+ meeting could take place on Sunday to resolve a production deal.
The stock market rally showed further weakness late last week, with week Apple (AAPL) and other mega caps no longer offer coverage. Major indices are beginning to pull back, especially the Nasdaq. But other indicators send more negative signals, from declining market size to leading stocks coming under pressure.
Energy supplies ran out of gas, with Callon Petroleum (CPE) flashing multiple key sell signals as it plunged. Year (YEAR) and Nvidia (NVDA), undercutting key short-term averages. ASML (ASML) rolled back from record highs for earnings this week. Finally, Tesla stock slipped toward long-term support as recovering former leaders continued retreats in July.
Tesla Shares, Nvidia and ASML Are Enabled IBD standings, while Roku stocks are on the Leaderboard watchlist. ASML stocks are listed on IBD Long-Term Leaders. Nvidia shares and ASML are on the IBD 50. CPE shares were the IBD share of the day on Friday due to the sell signals.
OPEC and key allies like Russia may hold a meeting on Sunday as OPEC+ approaches a production increase after the United Arab Emirates blocked a deal and demanded higher production for itself. Earlier this week, Saudi Arabia and the United Arab Emirates reached a compromise. OPEC ministers from several countries, including Saudi Arabia and the UAE, met online on Saturday.
Crude oil prices fell last week as many energy stocks sold hard.
Dow Jones Futures Today
Dow Jones futures open at 6 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
Keep in mind that an overnight action in Dow futures and elsewhere does not necessarily lead to actual trading in the next regular trading session.
The number of coronavirus cases worldwide reached 190.47 million. The number of deaths from Covid-19 was 4.09 million.
Coronavirus cases in the US have reached 34.92 million, with deaths above 624,000.
Stock market rally last week
The stock market woes increased and became more apparent as the week progressed.
The Dow Jones Industrial Average fell 0.5% in trading last week. The S&P 500 index fell 1%. The Nasdaq composite fell 1.9%, while the Nasdaq 100 lost just 0.9%. The small cap Russell 2000 plunged 5.05%.
Apple shares were up 1% last week, the seventh consecutive weekly gain, even with the 1.4% pullback on Friday.
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Growth and sector ETFs showed continued weakness.
One of the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 4%, while the Innovator IBD Breakout Opportunities ETF (BOLT) gave up 2%. The iShares Expanded Tech Software Sector ETF (IGV) pulled back 2.5% even with main component Microsoft (MSFT) rises for another week. The VanEck Vectors Semiconductor ETF (SMH) fell nearly 4% below the 50-day line, painfully reversing from Wednesday’s all-time high. Nvidia and ASML stocks are large SMH holding companies.
SPDR S&P Metals & Mining ETF (XME) fell 6.6% to its lowest point since late April. Global X US Infrastructure Development ETF (PAVE) sank 2.5%. US Global Jets ETF (JETS) fell 6.5% and continued a long slide. SPDR S&P Homebuilders ETF (XHB) withdrew 3.1%. The Energy Select SPDR ETF (XLE) fell 7.8% and the Financial Select SPDR ETF (XLF) fell 1.6%.
Due to more speculative story stocks, ARK Innovation ETF (ARKK) slipped 7.2% last week and ARK Genomics ETF (ARKG) fell 7.8%. ARKK fell from its 200-day moving average but held on to its 50-day line. ARKG hit below the level. Tesla stock is the largest holding of any of ARK Invest’s ETFs.
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Tesla FSD Subscriptions
Tesla is now offering drivers an FSD plan, where they will be charged $199 per month instead of a $10,000 flat fee. That could open up a big, steady revenue stream for the EV giant.
Despite the name Full Self-Driving, FSD does not offer a fully self-driving car. It is a level 2 driver assistance system where a human driver must be alert and can take the wheel at any time.
FSD subscriptions, long promised, come less than a week after Tesla released its FSD Beta V9, the latest test version of its FSD software, which now relies only on vision. A select group of Tesla drivers use FSD Beta on public roads. A slew of videos show that FSD Beta still requires substantial human intervention.
Tesla CEO Elon Musk, who touted Beta V9 as a huge improvement, said last week that big improvements could be coming in the next version, or the next.
Meanwhile, several other companies are testing L4 systems, sometimes without human drivers, including Waymo, Argo, owned by Google, operated by Ford (f) and Volkswagen (VWAGY), Amazon-owned Zoox and Cruise, most of which is owned by General engines (GM).
Tesla stock started strong last week, rising 4.4% on Monday and moving just below an aggressive entrance of 700.10 Tuesday morning. But the stocks went down and continued to slide. For the week, TSLA stock lost 1.9% to 644.22.
On a positive note, Tesla stock remains just above the 200- and 50-day lines. Compared to ARKK, many EV rivals or highly valued growth in general, Tesla stock hasn’t fallen too much. On the other hand, the EV leader did not rise as much as many comparable stocks from mid-May to late June.
Relative strength for TSLA stocks is not far above the nine-month low in early June.
Tesla’s results are expected on July 26.
Callon Petroleum Stock
CPE shares plunged nearly 10% on Friday and 24% for the week. The shale oil producer posted a 43% gain and then some. Callon Petroleum also fell firmly below the 10-week mark for the first time since the start of its big run in late 2020. Both are very strong sell signals. Investors who bought CPE stock off the latter base should have made at least partial gains by the time it fell below its 21-day line. Even long-term investors might have wanted to scrap Callon shares after last week.
As the XLE ETF showed, energy stocks plummeted this week as oil prices pulled back from multi-year highs. CPE stocks and other energy stocks have sold far more than oil prices. On the other hand, they rose much more than oil prices.
Nvidia shares fell 9.8% last week, significantly below the 21-day exponential moving average and starting to approach the 50-day/10-week. The chipmaker has been one of the biggest frontrunners since the end of May.
Investors who bought between late May and early June may have taken some profit on the 21-day line or even earlier. Recent investors may want to sell if Nvidia shares break the 10-week line decisively. Long-term holders have earned the right to hold NVDA shares for longer if they wish.
ASML stock hit an all-time high on Wednesday, as did the SMH ETF, but closed highs. Shares of Dutch chip manufacturers then fell sharply on Thursday and Friday. ASML stock fell just 0.6% but closed close to the low of its weekly range.
ASML gains are on tap Wednesday. That report, along with laggard Intel (INTC) on Thursday, will be critical for the semiconductor industry.
Roku shares fell 7.3% to 399.99 last week after initially showing aggressive entry on Monday. Shares fell below their 21 days, where they found support on July 8 during a short-lived market pullback. Investors who bought while it rebounded on July 8 are now in losses of 5% or more.
Roku stocks are currently holding above an early entry or double bottom buy point at 397.79. The official buying point is 463.09, according to MarketSmith analysis, from an entry.
Market rally analysis
The Nasdaq composite fell below the 21-day line on Friday, the first clear sign of trouble on major indices. The Dow Jones and S&P 500 are approaching their 21-day moving average. Apple stocks and tech mega-caps had masked the weakness, but even those started to bounce back towards the end of the week.
Meanwhile, the Russell 2000 has plunged below the 50-day line to a one-month low. Sector and growth ETFs showed similar weakness.
The stock market woes started to become apparent mid-week, especially on Thursday and Friday. On Wednesday, upwork (UPWK) and new IPO figs (FIGS) collapsed. Other breakthroughs and buying opportunities faltered as big winners like Nvidia stock and Callon Petroleum started selling.
But the market rally has struggled throughout the month. The advance/decrease line has been deteriorating for weeks. New lows easily beat new highs on the Nasdaq, despite it almost always being.
Ideally, Apple stocks, Microsoft and a few extended megacaps are slowing down, while market-wide returns and breakouts are working again. But investors need to work on their watchlists, not their wishlist.
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What to do now
Investors should be more defensive and hopefully reduce exposure in the past week or two. Get rid of losers and at the very least slash positions with modest gains starting to fade. If stocks fall back from solid gains, take at least a partial gain. If you have stocks that are still doing well, you can hold onto it, but you may still want to sell some stocks to get stronger. That could make it easier to maintain a core position, as Nvidia stocks, for example, fall back toward the 50-day line.
This is not a good time to make purchases. There aren’t many good institutions… and lately stocks have been set up for over-enthusiastic investors. New purchases don’t work, which isn’t surprising with leaders and most of the market pulling back.
If you feel the need to make a mental health purchase, make it a small position and keep your exit strategy in check.
It is probably a better idea to wait for the market to improve before adding exposure. That could happen soon: Many leading stocks are gripping or finding support on moving averages, including Roku stocks. But the market rally has not given any indication that it is ready to revive with wider participation.
Meanwhile, earnings season heats up, another wild card for a shaky market.
Read The Big Picture every day to keep up to date with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock updates and more.
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