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Dow Jones Futures: Stock Market Plotlines Converge

DATE POSTED:April 14, 2019

Dow Jones futures rose slightly Monday morning, along with S&P 500 futures and Nasdaq futures. As the current stock market rally nears record highs, key plotlines are converging. Top stocks such as Palo Alto Networks (PANW), Workday (WDAY) and Google-parent Alphabet (GOOGL) are nearing buy zones. Apple stock and Alibaba stock are just above buy zones. Encouraging comments about global growth and China trade signal a bullish policy outlook.

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It's not a coincidence that these storylines are coming together. The stock market rally hit resistance last month, in no small part because of some negative news about China trade talks and global economic growth. Many top stocks set up new bases during the recent market pullbacks, such as Palo Alto stock and Workday stock. Google stock formed a multi-week handle in its nine-month saucer-with-handle base.

Meanwhile, Apple (AAPL) and Alibaba (BABA) recently cleared their deep consolidations in lackluster fashion amid signs of an improving Chinese economy.

Dow Jones Futures Today

Dow Jones futures climbed 0.2% vs. fair value. S&P 500 futures rose 0.1%. Nasdaq 100 futures were just above fair value. Apple stock is a member of the Dow Jones, S&P 500 and Nasdaq. Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.

Treasury Secretary Steven Mnuchin said Saturday that the U.S. is open to a China trade deal including enforcement rules for America, not just China. That's the latest sign of compromise as negotiations near the end.

Meanwhile, global finance ministers expect the global economy to pick up steam soon but stressed they're ready to "act promptly" to support growth, following IMF meetings over the weekend.

Current Stock Market Rally

The Dow Jones, S&P 500 index and Nasdaq composite are all within 2% of their all-time highs. Growth stocks are leading the way. Among the best ETFs, Innovator IBD 50 ETF (FFTY) rose 1.2% last week. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 1.7% to a new high. VanEck Vectors Semiconductor (SMH) advanced 1.2% to a closing high.

Top Stocks Setting Up

While several stocks broke out last week, such as GoDaddy (GDDY), Gray Television (GTN), Fortinet (FTNT) and Wix.com (WIX), a larger number closed in on buy points.

In addition to Palo Alto Networks, Workday stock and Google stock, they include Paylocity (PCTY), Mimecast (MIME), Mercury Systems (MRCY), Cactus (WHD) and Fabrinet (FN) and many more.

Alibaba Stock, Apple Stock Hover In Buy Zone

Positive China trade figures fueled China stocks Friday, including the Alibaba stock breakout. That followed a negative reaction to weak trade data for the prior month.

Alibaba cleared an 188.19 cup-with-handle entry Friday amid positive China trade news. Apple stock, meanwhile, undercut its recent entry but closed just in its buy zone.

Both the Apple stock and Alibaba stock bases were 40% deep. Bases that deep are less likely to work. The Alibaba and Apple stock breakouts also came on average or weak volume, another negative sign.

In other Apple news, China telecom gear giant Huawei said it's "open" to selling 5G chips to other Apple, which does not yet have a 5G iPhone in the works. Huawei has become the world's No. 3 smartphone maker.

Bad Earnings Priced In?

Along with China trade and global growth headlines, earnings season is ramping up and will drive the overall market and individual stocks.

S&P 500 earnings are expected to show their first year-over-year decline since Q2 2016.

But is the bad news priced in, at least for certain sectors? Chipmakers have roared back in the current stock market rally despite big warnings from the likes of Micron Technology (MU), Nvidia (NVDA).

Stock Market Blockbuster?

While the stock market rally seems to be following a Hollywood script, there doesn't have to be a happy ending. If China trade talks break down or earnings results or outlooks disappoint, the Dow Jones and other key indexes will struggle to move convincingly into new high ground, at least in the short run.

The likes of Palo Alto stock and Google stock would struggle to buck a receding market tide, while Apple stock and Alibaba stock could fall back.

Due to a data error, an earlier version of this article stated erroneously that stock market futures were up sharply Sunday evening.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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