In a startling turn of events, Dow Jones futures, as well as S&P 500 and Nasdaq futures, witnessed a significant decline on Monday morning. Simultaneously, crude oil futures experienced a sharp spike. This tumultuous market response follows a massive assault by Hamas on Israel, setting the stage for a potentially extensive Israeli retaliation.
Hamas Unleashes Devastating Assault on Israel
Over the weekend, the Palestinian group Hamas executed a series of brutal and extensive attacks on Israel. Thousands of missiles rained down, while their forces infiltrated various regions in the southern part of the country. Tragically, these attacks resulted in the deliberate loss of over 1,000 civilian lives, with dozens, possibly hundreds, taken hostage. Responding to this crisis, Israeli Prime Minister Benjamin Netanyahu declared an all-out war on Hamas, prompting a forceful Israeli offensive. A “complete siege” on Gaza has been ordered, foreshadowing sweeping retaliation in the days and weeks ahead.
These events cast a shadow over the potential normalization of relations between Israel and Saudi Arabia. There are reports that Saudi Arabia may increase oil production next year as a diplomatic gesture, possibly aimed at securing U.S. approval for a U.S.-Saudi defense pact in recognition of Israel.
Dow Jones Futures Today
Dow Jones futures witnessed a 0.5% decline compared to their fair value. S&P 500 futures experienced a 0.6% decrease, while Nasdaq 100 futures plummeted by 0.8%.
Amid the Israel-Hamas conflict, defense stocks such as Lockheed Martin, Northrop Grumman, RTX, and General Dynamics saw substantial gains. In tandem, crude oil futures surged nearly 4%, reaching $86 a barrel, following an initial 5% surge on Sunday night. This surge in energy prices also triggered a rebound in energy-related stocks.
As a note, the bond markets remained closed on Monday due to the observance of Columbus Day.
Stock Market Rally: A Rollercoaster Week
The stock market witnessed a turbulent week, with both the Dow Jones and S&P 500 experiencing dips below recent lows, temporarily stalling their rally attempts. However, the Nasdaq managed to maintain its upward momentum. On Friday, the major indices executed a bullish upside reversal in higher trading volumes, propelled by robust performances from leading stocks.
Throughout last week, the Dow Jones Industrial Average exhibited a modest decline of 0.3%, eventually recovering to secure a 0.9% gain on Friday. The S&P 500 index demonstrated resilience, rebounding from the 40-week line to achieve a 0.5% increase. Meanwhile, the Nasdaq composite soared by an impressive 1.6%, both on Friday and for the entire week, successfully surpassing the 21-day line. In contrast, the small-cap Russell 2000 faced a more challenging week, slumping by 2.1% after hitting five-month lows earlier.
Despite the positive turn on Friday, the overall market breadth has displayed significant weakness over the past several weeks.
The 10-year Treasury yield experienced a notable surge of 21 basis points, peaking at 4.78% before retreating slightly from its early Friday high of 4.89%. While the bond yield did rise a few basis points on Friday, the dollar saw a third consecutive session of decline.
In the energy sector, U.S. crude oil futures took a substantial hit, plummeting by 8.8% to $82.79 per barrel. Gasoline futures followed suit, falling by 8.6% last week and over 19% in the past three weeks, ultimately hitting a low for 2023.
ETF Performance and Growth Stocks Analysis
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) managed a modest 0.5% gain last week. The iShares Expanded Tech-Software Sector ETF (IGV) exhibited a more substantial increase of 2.2%, reclaiming the 50-day line. Noteworthy cybersecurity companies like CRWD, Qualys, and Palo Alto are all members of IGV. The VanEck Vectors Semiconductor ETF (SMH) experienced a 2.3% gain, with Nvidia stock taking the lead as the top holding. CDNS stock is featured in both SMH and IGV.
On a different note, more speculative story stocks faced some setbacks. ARK Innovation ETF (ARKK) encountered a 1.2% dip, while ARK Genomics ETF (ARKG) saw a more significant drop of 5.7%. Tesla stock remains the primary holding across Ark Invest’s ETFs.
In various sectors, the performance was mixed. The SPDR S&P Metals & Mining ETF (XME) slid by 3.2% last week, whereas the Global X U.S. Infrastructure Development ETF (PAVE) experienced a slight dip of 0.4%. The U.S. Global Jets ETF (JETS) descended by 1.5%, while the SPDR S&P Homebuilders ETF (XHB) stepped down by 2.1%. The Energy Select SPDR ETF (XLE) faced a substantial 5.2% sell-off, while the Health Care Select Sector SPDR Fund (XLV) rebounded with a 1% increase, with LLY stock being a notable member. The Industrial Select Sector SPDR Fund (XLI) slipped by 0.6%.
In the financial sector, the Financial Select SPDR ETF (XLF) witnessed a modest 0.4% dip, featuring CME stock as a member.
Leading Stocks in Buy Zones
Several stocks demonstrated notable resilience amidst the market’s challenges:
- Nvidia stock surged by 2.4% to reach 457.62 on Friday, accumulating a 5.2% gain for the week. It successfully cleared the 50-day line, offering an early entry point. As of the latest close, NVDA stock established a new base with a 502.66 buy point.
- Meta stock experienced a remarkable 3.5% jump to 315.43 on Friday, effectively clearing a 310.64 cup-with-handle buy point, as well as a 312.87 entry.
- Arista stock displayed an impressive 3.2% surge on Friday, culminating in a staggering 45.5% gain for the week, closing at 194.02. Shares successfully surpassed a 189.90 early entry, now forming a flat base with a 198.70 buy point.
- Eli Lilly stock rebounded from its 50-day line on Friday, soaring by 4.4% to 565.22 and surpassing the 21-day moving average. This development presented a fresh buying opportunity.
- Qualys stock exhibited a 4% jump on Friday to 160.97, effectively clearing short-term resistance around 155, as well as a recent 52-week high of 157.88. This area could be viewed as a de facto flat base or a handle to a base tracing back to September 2022.
- CrowdStrike stock demonstrated a striking 6.9% increase on Friday, reaching 176.69 in heavy trading volume, vaulting from the 21-day line to clear several months of messy consolidation. However, CRWD stock closed a noteworthy 11.4% above its 50-day line.
- Palo Alto stock saw a substantial 4.2% leap to 246.69 on Friday, surging from near the 50-day line and surpassing some very short-term levels. PANW stock now boasts a 258.88 consolidation buy point, though investors may consider using 254.23 or a trendline around 250 as additional early entry points.
- CME stock surged by an impressive 4.85% to 211.93 over a transformative week, engulfing the trading activity of the past two months. On Thursday, shares rebounded from the 50-day line, and on Friday, they cleared the 209.31 flat-base buy point according to MarketSmith analysis.
- Vertiv stock witnessed a notable 6.9% bounce to 39.77 for the week, including a 4.2% gain on Friday. Shares rallied from both the 21-day and 10-week lines, simultaneously surpassing short-term levels, thus offering an early entry point. VRT stock, one of the standout performers in 2023, now forms a new flat base with a 40.41 buy point.
- Cadence Design stock exhibited a 3.9% surge on Friday to 243.95, rebounding from the 50-day line and breaking the downtrend of a handle, presenting an early entry opportunity. CDNS stock is currently advancing towards a 247.50 cup-with-handle buy point.
Tesla’s Resilience in the Face of Adversity
Tesla displayed remarkable resilience, posting a 4.1% surge, closing at 260.53 for the week. Wednesday saw a substantial 5.9% jump, breaking through the 50-day line and offering an early entry point. While shares briefly dipped back to the 50-day line on Friday morning, Tesla rebounded, securing a modest gain. A move above Thursday’s intraday high of 263.20 could signify a new early entry point, indicative of a potential break in the handle formation. Presently, Tesla stock holds a 278.98 cup-with-handle base.
Tesla’s recent performance stands out against a backdrop of seemingly negative news. Early Monday, Tesla reported third-quarter deliveries that fell considerably below expectations. On Monday night, Tesla unveiled a new, more affordable Model Y, priced $3,750 lower than the previous base variant. Late Thursday, Tesla implemented price reductions for both Model 3 and Model Y in the U.S., alongside Model Y cuts in Norway.
Bulls are looking forward to the launch of an updated Model 3, set to commence deliveries in China and Europe shortly. Additionally, there is growing excitement around the upcoming release of the Cybertruck, as well as more speculative, long-term ventures in self-driving technology, AI, and robotics.
Guidance for Investors
The stock market rally exhibited positive signs as the week came to a close. Major indices executed an impressive upside reversal on Friday, and a significant number of leading stocks provided buy signals.
For investors, Friday offered an opportune moment to add to their portfolios. If the market maintains this positive momentum, consider gradually shifting away from cash positions.
It’s important to note that while stocks rebounded on Friday, the surge in market rates continues. Should the 10-year Treasury bond yield approach 5%, there may be increased volatility and potential setbacks.
As we move forward, it’s advisable to stay prepared. Keep your watchlists current, paying particular attention to stocks that are approaching actionable levels.
In the upcoming week, investors will receive crucial inflation reports with the release of CPI and PPI data. Additionally, the earnings season will kick off, featuring heavyweights such as JPMorgan Chase, UnitedHealth, and Delta Air Lines.
In conclusion, the rapidly evolving geopolitical landscape and its impact on financial markets necessitate vigilance and adaptability. Keeping a close eye on market trends and making informed decisions will be paramount in navigating the uncertainties ahead.
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