May 18, 2024

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Dow Jones Futures: Nvidia Leads Bullish Reversal;  Here comes the Fed's earnings report to the market

Dow Jones Futures: Nvidia Leads Bullish Reversal; Here comes the Fed's earnings report to the market

Dow Jones futures were little changed after hours, along with S&P 500 futures and Nasdaq futures. The Federal Reserve will conclude its two-day meeting on Wednesday afternoon, with the focus on expectations for interest rate cuts by the Fed.




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The stock market rally made modest gains on Tuesday, as it fought off initial losses, especially the Nasdaq.

Nvidia (NVDA) initially fell after the big AI event, but then reversed slightly higher. Several other AI stocks trimmed their losses or turned positive as well. but, Advanced micro devices (AMD) declined strongly for a while Super micro computer (SMCI) Faltered in stock offering plans.

Early on Wednesday, Broadcom (Afgo) will hold an AI investor meeting as the Nvidia GTC conference continues. Micron technology (Mo) Second-quarter financial results will be released Wednesday night, with AI implications as well. Thursday, Microsoft (MSFT) will be holding its own AI event.

Woodward (World Water Day), CyberArk program (Cyber), CrowdStrike Holdings (CRWD), Arista Networks (network), Ares Management (Ares), Rhythm design systems (CDNS), summary (Snaps), JFrog (frog), TransDigm (TDG), Kings Project (DKNG), Neurobiological sciences (npix), Archrock (Arok), Discom (DXCM), Royal Caribbean (kick) and Microsoft stocks are all worth watching.

Investors should remain cautious until after the Fed meeting and Fed Chairman Jerome Powell's press conference.

Nvidia and ARM stock is on IBD Leaderboard, with Dexcom on the leaderboard watchlist. DraftKings stock is on SwingTrader. Microsoft, Cadence Design, and Synopsys stocks are some of IBD's long-term leaders. Nvidia, Arm Holdings, CrowdStrike, DraftKings, Arista Networks, Ares, JFrog, Royal Caribbean, and Microsoft are in the market. Bahraini dinar 50. Nvidia, CrowdStrike, Arista Networks, and Super Micro are in the market IBD Big Cap 20. Woodward was IBD's stock of the day on Tuesday.

The video embedded in the article reviewed shares of Woodward, Sinopsys, and Arista Networks.

Federal Reserve meeting

The Fed will release its latest “dot chart” of interest rate expectations to policymakers at 2 p.m. EST. In late 2023, a dot chart indicated three rate cuts by the Fed in 2024. There is speculation that policymakers could reduce that to two rate cuts.

Fed Chairman Powell will hold his press conference at 2:30 PM ET.

Markets are leaning slightly toward a Fed rate cut in June, but it's not a done deal.

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Dow jones futures today

Dow Jones futures rose 0.1% versus fair value. S&P 500 futures and Nasdaq 100 futures were little changed.

Remember, an overnight move in Dow Jones futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.


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Stock market pool

The stock market rally showed resilience on Tuesday, with the Nasdaq pulling slightly higher.

The Dow Jones Industrial Average rose 0.8% in stock market trading Tuesday. The S&P 500 rose 0.6%. The Nasdaq Composite Index rose 0.4%. The Dow Jones and Nasdaq maintained support at the 21-day EMA, while the latter also remained at the 16,000 level.

Market breadth was strong.

The small-cap Russell 2000 advanced 0.5%, but is still below its 21-day line. Super Micro and a few other relatively high-weight stocks are likely to weigh on the index on Tuesday.

The stock market rally largely stalled in March, with the Nasdaq and Russell 2000 showing longer patterns. This allows some rules to form. Better yet, the 50-day moving average is closing the gap against the Nasdaq, giving the market more room to rise if there is another advance.

It was positive to see Nvidia and Microsoft, two of the leaders in AI, showing resilience. Many leading technology stocks are at key levels, and can look very strong or weak in just a couple of days. At the same time, several other areas of the market are showing strength, particularly commodities and energy.

The Fed's expectations for rate hikes and Powell's comments are sure to send stocks and Treasury yields swinging Wednesday afternoon. It's basically an earnings report for the entire market. The S&P 500 can rise — or fall — 1% or 2% very quickly following the Fed's moves, possibly with significant volatility moves. Don't be surprised to see the Fed's reaction on day 2 go in the other direction.

The 10-year Treasury yield fell 4 basis points to 4.3%, ending a six-session winning streak, but remains close to its 2024 highs.

US crude oil prices rose 0.9% to $83.47 per barrel, the highest closing level since late October.

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ETFs

Among the growth ETFs is the iShares Expanded Technology Software Sector ETF (IGV) rose 0.7%. Microsoft is a huge holding, with CrowdStrike also in the ETF. VanEck Vectors Semiconductor ETF (Trait) fell 0.2%, with Nvidia stock being the dominant member but AMD also a major member. Synopsys and Cadence Design stock is in both IGV and SMH.

Reflecting more speculative stocks, the ARK Innovation ETF (Ark(down 0.6% and ARK Genomics ETF)Arkj) by 0.4%.

SPDR S&P Metals and Mining Fund (XME) advanced by 0.4%. SPDR S&P Homebuilders ETF (XHB) rebounded 1.8%. Energy Select SPDR ETF (XLE(Up 1.1% and the Healthcare Sector SPDR Fund)Forty-fifth) rose 0.7%.

Selected Industrial Sector SPDR Fund (forty-first) rose by 0.9%. Financial Select SPDR ETF (XLF) by 0.5%.


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Nvidia stock

Nvidia stock fell to 850.10 Tuesday morning, but closed up 1.1% to 893.98. Since hitting historically extended levels earlier this month, Nvidia has moved sideways. It has not touched the 21-day line since the February 21 earnings report and remains extended from the 50-day line. But NVDA stock could run in a tight pattern for three weeks.

Late Monday, Nvidia unveiled its new, much faster AI chip and made a slew of announcements at its GTC conference, which runs through Thursday. The AI ​​chip was expected, but it's still impressive.

AMD stock fell 4.8% to 181.42, completely outpacing the recent breakout. The chipmaker has bounced off the 50-day line somewhat. AMD stock is down just over 5% so far this week after falling 7.9% last week. AMD has caught up with Nvidia's AI chips, but will now fall behind the new Blackwell entry.

Broadcom stock rose slightly but closed below its rising 50-day line for the first time since early November. Broadcom's AI news on Wednesday will be important for AVGO stock and several other AI companies, including partner Arista Networks.

Super Micro Stock

Super Micro stock fell nearly 9% to 910.97, closing below its 21-day moving average for the first time in months. The artificial intelligence server maker announced that it plans to sell 2 million shares of Super Micro stock. But SMCI stock closed well at an intraday low of 863.

Investors who have held Super Micro since its January breakout may have used Tuesday's decline as a catalyst to sell some of their holdings. A decisive break of the fast-rising 50-day line could be a strong sell signal.

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Stocks to watch

Cadence Design and Synopsys stock continued to rebound from their 10-week streaks, breaking short downtrends on Tuesday on strong volume. These two names are arguably playable, along with Dexcom stock, which is at a flat-based buy point.

Most others are setting up stocks.

Woodward stock is near a buy point with a flat base, along with Arista Networks and Neurocrine Biosciences, according to Marketsorg analysis. The Royal Caribbean stock handle works with a short cup base.

Archrock stock is closing at a bullish fundamental buy point.

Shares of CyberArk, CrowdStrike and Ares found support around the 10-week line. TransDigm and JFrog stock pause bullishly at 21-day lines.

DraftKings stock, bouncing off its 21-day and 10-week lines, is close to forming a new base.

Microsoft stock is near a buy point from a short consolidation, heading into Thursday's “Future of Work” event.

What are you doing now

This is an important time to monitor versus taking too much action. It seems that the rising market is tired, and is taking a breather. The major indices and leading stocks may soon be ready to take off again, or they may be about to make a more significant pullback.

The Fed meeting is the next big test. Thursday's Microsoft AI event, while perhaps less important than the Nvidia GTC conference and the Fed meeting, will also be important, especially for AI software players and major suppliers.

With the market and many leading stocks approaching potential turning points, investors need to be prepared. Update your watch lists and have your exit plans ready. Stay involved and stay flexible.

Read The Big Picture every day to stay on top of the market trend and leading stocks and sectors.

Please follow Ed Carson on topics at @edcarson1971 And X/Twitter at @IBD_ECarson For stock market updates and more.

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