Dow Jones futures fell sharply Sunday night, along with S&P 500 futures and Nasdaq futures, while crude oil futures skyrocketed as pressure grew for a Russian oil embargo The stock market rally attempt saw losses last week, reversing from key resistance as Russia’s Ukraine invasion continued to roil financial markets.
Russia continues to lose troops and equipment, but is pounding major cities with artillery and bombs, raising Ukrainian civilian casualties. Humanitarian corridors to evacuate civilians broke down for a second straight day, amid Russian shelling.
The U.S. says it’s working with Poland on ways to get more fighter jets to Ukraine. It’s also discussing a halt to Russian crude imports, along with Europe.
While the market rally attempt is still ongoing, the major indexes are starting to tumble toward their Feb. 24 lows. That could mark the third leg of a market correction going back to early January or late November. In addition to the ongoing Russia-Ukraine crisis, the consumer price index this week will offer the latest inflation reading just days before the Federal Reserve meets to begin raising interest rates.
AVGO stock and the others listed here are all trading near their 50-day lines, close to possible early entries while working on proper bases. Broadcom and COST stock moved Friday after earnings Thursday night. The relative strength lines for REGN stock and the others here are at or near consolidation or long-term highs. That’s an especially bullish signal for stocks still in bases.
Just because these stocks are holding up reasonably well right now, that may not continue, especially if the market heads back or below recent lows.
Nvidia stock, which at various times in the past few months had hinted at possible buy signals, tumbled below its 200-day line on Friday. It’s still above its January and February lows. Advanced Micro Devices (AMD) and Microsoft stock undercut that long-term level on Thursday and lost more ground Friday. Google stock, which hit resistance at the 200-day line this week, is turning south.
Vertex stock, Microsoft (MSFT) and Nvidia (NVDA) are on IBD Leaderboard. Fortinet stock, Microsoft and Google parent Alphabet (GOOGL) are on IBD Long-Term Leaders. Fortinet, Vertex and COST stock are on the IBD 50.
Vertex was Friday’s IBD Stock Of The Day.
The video embedded in the article reviews another volatile market week and analyzes Vertex, Costco and AVGO stock.
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Dow Jones Futures Today
Dow Jones futures sank 1.1% vs. fair value. S&P 500 futures lost 1.4% and Nasdaq 100 futures tumbled 1.8%.
Amid growing pressure to ban Russian oil imports, U.S. crude futures ran up 7% to $124 a barrel, after skyrocketing 26% last week. Brent crude oil futures briefly spiked above $135 a barrel after surging to $118.11 last week.
Oasis Petroleum (OAS) and Whiting Petroleum (WLL) are close to a merger, the Wall Street Journal reported Sunday night, citing sources. The North Dakota shale players could announce the deal early this week.
Gold and base metals such copper rose solidly, extending big recent gains. Wheat futures jumped yet again.
The 10-year Treasury yield fell 3 basis points to 1.69%.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Russia’s Ukraine Invasion
Russia’s Ukraine invasion continues to struggle in the north, with the capital Kyiv still holding out. In the southeast, Russia has seized a lot of territory.
Russia has suffered heavy troop and equipment losses amid logistical failures and stiff Ukrainian resistance, bolstered by anti-tank weapons such as Javelins. Russia is now sending civilian trucks and other vehicles for use in military supply chains, a sign of the military’s logistical struggles and equipment shortages.
Local truces quickly broke down around the surrounded city of Mariupol for a second straight day, with Ukraine accusing Russia of shelling civilians trying to evacuate along designated humanitarian corridors. Russia is increasingly targeting residential areas, often directly targeting civilians.
Several Ukrainian cities Sunday night reported the heaviest Russian bombing yet.
Russian President Vladimir Putin claimed Saturday that Ukraine’s air defenses and military infrastructure are almost completely destroyed. Western officials say that is not the case, with strong evidence that Ukraine’s forces took down several Russian aircraft over the weekend.
On Sunday evening, a U.S. defense official said Russian forces gained little territory over the weekend.
Late Sunday, Russia claimed that Ukraine has rigged an experimental reactor at the Kharkov Institute of Physics & Technology in Khardiv to stage a provocation and accuse Moscow of a missile attack. The facility, like the broader city has come under Russian missile attack.
Fighter Jets To Ukraine?
Secretary of State Antony Blinken, in Moldova, confirmed that the U.S. is working with Poland to provide 28 MiG fighter jets to Ukraine. He said NATO countries have a “green light” to send fighter jets to Ukraine. Saturday evening, the Wall Street Journal reported that the U.S. was mulling a deal in which it would send F-16 fighter jets to NATO-ally Poland, which would then give Soviet-era fighter jets to Ukraine. Ukrainian pilots are familiar with such fighter jets.
The possible move comes as Ukraine President Volodymyr Zelenskyy pleaded for fighter jets in a Saturday video conference with top U.S. lawmakers.
Russian Crude Oil Ban?
Blinken also said the U.S. is talking with European allies about banning Russian crude oil imports. That would be a big weapon vs. Russia’s economy, but could send crude oil prices soaring even further. The U.S. only uses a small amount of Russian crude, but Europe uses a lot. Europe is especially reliant on Russian natural gas.
Russia has struggled to export its crude due to buyers and shippers “self sanctioning,” though last week Shell (SHEL) bought some Russian oil at a big discount.
The U.S. could relax its ban on Venezuelan crude imports to replace Russian oil. U.S. official and energy giants reportedly have been meeting with Venezuelan officials in recent days.
Visa (V) and Mastercard (MA) suspended operations Saturday in Russia, which faces increasing economic and financial isolation for Putin’s invasion. Visa and Mastercard cards issued in Russia will only work in the country as of March 10, while cards issued elsewhere will no longer work in Russia. American Express (AXP) halted Russia operations on Sunday. Many Russian banks are shifting to China’s UnionPay network.
Zelenskyy called for the card giants to suspend all Russian operations in Saturday’s call with U.S. members of Congress.
On Sunday, there was a big protest in Kazakhstan against the Russian invasion of Ukraine. Two months ago, Putin sent Russian troops to suppress big antigovernment protests in Kazakhstan. It’s notable that the Kazakh government — which denied a Putin request to send troops for the Ukraine invasion — allowed rgw protest. Russia sanctions will also hit the Kazakh economy hard.
Over a 1,000 people were detained in Russia Sunday from new antiwar protests took place. The Putin regime recently declared the people calling the Ukraine invasion a “war” face up to 15 years in prison.
Stock Market Rally
The stock market rally attempt tried to move higher last week, but selling took hold on Thursday and Friday.
The Dow Jones Industrial Average fell 1.3% in last week’s stock market trading. The S&P 500 index also declined 1.3%. The Nasdaq composite slumped 2.8%. The small-cap Russell 2000 retreated 1.9%.
U.S. crude oil prices surged 26% to $115.68 a barrel last week, a 13-year high.
An new Iran nuclear deal would open the door to a big increase in Iranian crude exports. But Russia wants big exemptions from Western-related sanctions over its Ukraine invasion as part of any Iran accord. So, Iran talks are expected to continue this week.
The 10-year Treasury yield plunged 26 basis points last week to 1.72%, even with Tuesday’s spike of 16 basis points.
The iShares Expanded Tech-Software Sector ETF (IGV) slumped 3.1%, with MSFT stock a huge component and Fortinet also a holding. The VanEck Vectors Semiconductor ETF (SMH) plunged 5.6%. AVGO stock, AMD stock and Nvidia are major SMH holdings.
SPDR S&P Metals & Mining ETF (XME) skyrocketed 14.2%, its fifth straight weekly gain. The Global X U.S. Infrastructure Development ETF (PAVE) added 1.8%. U.S. Global Jets ETF (JETS) plunged 13.3%, as Russia’s Ukraine invasion derailed a promising travel environment. SPDR S&P Homebuilders ETF (XHB) lost 1.2%, another weekly loss. The Energy Select SPDR ETF (XLE) soared 9.2% while the Financial Select SPDR ETF (XLF) slumped 4.8%. The Health Care Select Sector SPDR Fund (XLV) climbed 1.2%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) plunged 11.2% last week to a 20-month closing low. And ARK Genomics ETF (ARKG) skidded 9.7% lower. Parent Ark Invest does have a position in VRTX stock.
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AVGO stock rose 1.4% to 595.99 last week. Shares popped 3% on Friday, but it was unable to close above the 50-day line. Investors could use 614.74, just above the Feb. 10 high, as an early entry. The official buy point is still far away at 677.86. But the RS line is already close to highs.
Broadcom earnings and sales topped views late Thursday, with growth slightly picking up from the prior quarter. The chipmaker also guided for faster revenue growth in the current quarter.
AVGO stock has a price-to-earnings ratio of 19, much lower than Nvidia or AMD stock. But with the Nasdaq and chip plays struggling, Broadcom likely needs some market help to make a significant move.
VRTX stock popped 3.6% to 238.66 last week, rebounding from its 50-day and 10-week lines for the first time in its recent runs. Friday’s move came on above-average volume, so it’s actionable. Also Vertex now has a flat base with a buy point of 255.03, according to a weekly MarketSmith chart. The RS line for VRTX stock is at a 52-week high.
REGN stock, after several days trading between the 50-day and 200-day lines, rose 1.5% to 620.41 on Friday, closing above the 50-day. Regeneron stock has a 673.96 buy point from a flat base within, or next to, a larger consolidation. Investors could use 645.10, just above the Feb. 11 high, as an early entry. A downward-sloping trendline from the December high offers an aggressive entry near 635.
Medical stocks such as Vertex and Regeneron may be quasi-safe havens, with health care spending relatively insulated from economic swings and international crises.
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Costco stock fell 1.4% on Friday to 525.50, but closed well off session lows, holding above the 50-day line. That followed a six-day win streak. COST stock has a 571.59 cup-base buy point. Investors could use Thursday’s intraday high of 538.96 + 10 cents as an early entry.
The RS line is already at record highs.
Costco earnings rose 15% in the latest quarter, with sales up 16%, both beating views.
FTNT stock rose 3.2% to 335.46 last week, rebounding from near the 50-day line and clearing a 332.46 early entry. That entry is still actionable, though Fortinet stock is working on a handle that would offer a 351.62 buy point. For now, the official cup-base buy point is 371.87.
The RS line for FTNT stock is at highs.
Russia’s Ukraine invasion, and related cyberattacks, highlighted the need for strong cybersecurity.
Market Rally Analysis
The stock market rally attempt is still ongoing, but closed out the week in disappointing fashion. After hitting their 21-day exponential moving averages at Thursday’s open, the major indexes retreated significantly.
The market rally attempt could still stage a follow-through day at any time. But there’s no guarantee that even a confirmed uptrend will work. Investors also have to consider the risks that the major indexes will break below their recent lows, beginning a new leg down for the market correction. Big market corrections or bear markets often have a third leg, such as the 2018 bear.
For the Nasdaq, 12,587,88 marks the Feb. 24 low, but the 13,000 level will be key. That would undercut several recent lows or closing lows going back 10 months.
Defense, mining, steel, fertilizer and energy stocks are thriving but so many are greatly extended. Meanwhile, the broad market is struggling. Travel stocks and financials, which had been looking OK, are breaking down.
Aggressive growth, which was only starting to get back up, suffered huge losses late last week.
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What To Do Now
The stock market rally attempt looks increasingly feeble. A few sectors are doing well, but many of those names are greatly extended. These areas of strength could be vulnerable if conditions change and fuel a broader market rebound.
Don’t get sucked in by short-lived gains in a bad market. The Nasdaq composite has had four 2%-plus gains since the Jan. 28 low, three of which were more than 3%. But the Nasdaq has trended lower over that time, especially since Feb. 9.
Cash has been a great position, and may continue to be for an extended period. If you’re going to play this market, stick to strong sectors. Consider short-term goals, such as selling all or at least some of a position if you have a 10% gain.
Keep working on your watchlists. AVGO stock, Vertex and more are setting up or flashing buy signals. Perhaps they’ll be leaders in a new uptrend. Or perhaps, like Nvidia stock and Google stock, they’ll tease entries in a tough environment and then fade.
So don’t anticipate buy signals or a confirmed market uptrend. Just be ready to act when the time is right.
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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