Futures: Stay Cool In Hot Rally; Meet The New AI Chip Leader

Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures. Bitcoin fell back from nearly $100,000.

The stock market rally had a strong week, though Google-parent Alphabet (GOOGL) and some megacaps saw muted Nasdaq gains late in the week.

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One of those tech titans, Nvidia (NVDA), wavered after earnings, ending the week flat but still in a buy zone. However, recent IPO Astera Labs (ALAB), a relatively small company, is now the clear leader in AI chip stocks.

It was a strong week for leading stocks, with many flying into and often out of buy zones, including ALAB stock.

TechnipFMC (FTI), ACV Auctions (ACVA), TJX Cos. (TJX) and Ryan Specialty Holdings (RYAN) are all in traditional buy zones.

Burlington Stores (BURL) and Dell Technologies (DELL) also are in buy zones after Friday breakouts. But both report on Tuesday.

So do CrowdStrike (CRWD), Workday (WDAY), Abercrombie & Fitch (ANF) and Nutanix (NTNX). CrowdStrike is extended from a buy point. ANF stock is near a trendline entry. Workday is working on a handle buy point. Nutanix is near an alternate handle entry.

Investors can take advantage of new entries, but stay cool. Don’t treat the past few weeks as a “new normal” for stock performance.

Nvidia stock is on IBD Leaderboard, with Astera Labs on the Leaderboard watchlist. Astera Labs stock and Nvidia are on the IBD 50.

Trump Names Bessent For Treasury Secretary

Late Friday, President-elect Donald Trump named hedge fund executive Scott Bessent, who had been generally been seen as a Wall Street-friendly choice. He’ll help push Trump’s efforts for tax cuts and financial deregulation. He’ll also be a key player in implementing Trump tariff hikes, with hope that Bessent will seek to implement increases carefully.

Dow Jones Futures Today

Dow Jones futures open at 6 p.m. ET, along with S&P 500 futures and Nasdaq 100 futures.

ETFs tracking the Dow Jones, S&P 500 and Nasdaq 100 rose 0.2% Friday evening, following Trump’s Treasury Secretary nomination.

Bitcoin, which got as high as $99,768 on Friday, was just above $96,000 Sunday morning.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

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Stock Market Rally

The stock market rally had a strong performance that was even better than major indexes suggested, especially the Nasdaq.

The Dow Jones Industrial Average gained nearly 2% in last week’s stock market trading, setting a record close Friday. The S&P 500 index and Nasdaq composite gained 1.7%. The small-cap Russell 2000 surged 4.5%.

All of these indexes tested their 21-day lines multiple times in the past week, moving off those levels. The Nasdaq, which hit resistance at the 19,000 level, is still relatively close to the 21-day. But it’s also close to its postelection peaks.

The Invesco S&P 500 Equal Weight ETF (RSP) popped 2.55%, outperforming the S&P 500 and matching a record high Friday.

The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) bounced 3.5%, outperforming the Nasdaq 100 and the Nasdaq.

Stalling megacaps are not just masking the underlying market strength, they may be helping to fuel the underlying strength. Big institutions selling relatively small slices of, say, Nvidia or Google might still be raising several billion dollars or more. That’s massive firepower for bidding up much-smaller stocks.

The 10-year Treasury yield fell two basis points to 4.41%, trading in a tight range near five-month highs. The two-year Treasury yield, more closely tied to the Fed rate outlook, climbed for a 10th straight week, up seven basis points to 4.37%.

U.S. crude oil futures jumped 6.5% to $71.24 a barrel last week.

Bitcoin surged 10.8% to $99,290.67, up nearly 49% over the past four weeks.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) soared 9.2% last week to a two-year high. The iShares Expanded Tech-Software Sector ETF (IGV) popped 4.9% to record levels. The VanEck Vectors Semiconductor ETF (SMH) gained 1.95%, just below the 10-week line. Nvidia stock is the dominant holding in SMH.

ARK Innovation ETF (ARKK) jumped 5.1% last week and ARK Genomics ETF (ARKG) rallied 5.2%.

SPDR S&P Metals & Mining ETF (XME) ran up 5.5% last week. The Global X U.S. Infrastructure Development ETF (PAVE) advanced 3.6%. U.S. Global Jets ETF (JETS) fell 1.1%. SPDR S&P Homebuilders ETF (XHB) bounced 3.6%. The Energy Select SPDR ETF (XLE) climbed 2.7% and the Health Care Select Sector SPDR Fund (XLV) rebounded 1.6%.

The Industrial Select Sector SPDR Fund (XLI) notched a 2.5% gain. The Financial Select SPDR ETF (XLF) rose 1.7%.

Time The Market With IBD’s ETF Market Strategy

Nvidia Stock

Nvidia stock fell 3 cents to 141.95 for the week. Shares briefly spiked to a record 152.89 Thursday morning following earnings, but finished the week just below the 21-day moving average. NVDA stock held the 140.76 consolidation buy point, according to MarketSurge. But it’s gone nowhere over the past month, and is essentially flat since the June peak.

Late Wednesday, Nvidia reported a 103% EPS gain last quarter with revenue soaring 94%, both beating. But the AI chipmaker only guided slightly higher on the current quarter, which will include Blackwell AI chip shipments.

Taiwan Semiconductor (TSM) is hitting resistance near an early entry, but Broadcom (AVGO) and Arm Holdings (ARM) are clear laggards.

Astera Labs: New AI Chip Leader

Astera Labs is a minnow next to these chip giants, with $113.1 million in Q3 sales vs. Nvidia’s $35.1 billion. But the 2024 IPO is the clear AI chip stock leader right now. The company is now profitable with huge revenue growth vs. a year earlier and quarter on quarter.

Shares have nearly tripled from their early August low of 36.22. Last week, Astera Labs stock leapt 18.3% to 102.28. On Thursday, following Nvidia earnings, ALAB stock cleared a 100.06 high-handle entry on a consolidation that started in late March. Astera Labs is in range of that entry, though shares are extended 47% above their 50-day line.

What To Do Now

The stock market rally is looking strong, with the indexes near record highs and leaders powering higher.

Some of the megacaps may be sitting out for a time. Google stock and Microsoft (MSFT) are clear laggards right now, but Meta Platforms (META) and Amazon.com (AMZN) have faded off. Nvidia stock is in a buy zone, but it isn’t going anywhere.

So, investors need to adjust. Luckily, a slew of other stocks have been acting well from a variety of sources.

Many stocks flashed buy signals last week, offering opportunities to add exposure. There are still stocks in buy zones or setting up.

Investors, who should be heavily invested, can look for incremental buys or add-on purchases, while also paring laggards.

But after the huge gains in many leaders over the past few weeks, keep a level head. Weekly gains of 10%, 20% in leading stocks aren’t the new normal. Enjoy these periods, but buying extended and other super-aggressive moves that worked in the past few weeks could backfire now.

Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

Please follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.

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