Stock Market Surprises Investors Amid Growing Iran Tensions; Strategies for Moving Forward

Stock Market Surprises Investors Amid Growing Iran Tensions; Strategies for Moving Forward

Dow Jones futures will open Sunday evening, along with S&P 500 and Nasdaq futures.




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The stock market rally sent mixed messages during the week, but ended with a bearish outcome. The Nasdaq set a closing record Thursday as Nvidia (NVDA) and other mega-cap and AI stocks rebounded. But the S&P 500, Dow Jones and Russell 2000 suffered from high inflation and tensions in the Middle East, with the small-cap Dow and Russell trading below their 50-day lines. The Nasdaq just made a weekly gain

THE CBOE Volatility Index, the market’s fear gauge, hit its highest levels since late October on Friday, amid fears that Iran could directly attack Israel, raising the prospect of a much larger conflict in the Middle East. Disappointing JPMorgan Chase (JPM) advice, a big Arista Networks (Aneta) liquidation and misfortunes of China Intel (INTC) And Advanced microsystems (AMD) also had harmful consequences.

All of this has led to a risk-averse attitude, especially as the weekend approaches.

Investors should recognize Friday’s stalling of market expectations and respond accordingly.

Upcoming key results

Goldman Sachs (GS) And Charles Schwab (Software) report early Monday. Goldman stock fell below its 50-day line on Friday, while Schwab remains in a buy zone.

Chip equipment giant ASML (ASML) and chipmaker Nvidia Taiwan Semiconductor (TSM) could be the two biggest gains of the coming week. Their findings and directions will have big implications for the chip industry, including Nvidia, Broadcom (AVGO), Lam Search (LRCX), Applied materials (HUGE) And KLA Corp. (CLUTCH).

All of these chip stocks have potential new bases or entries.

Nvidia shares are in progress MII classification, Swing Trader and the MII 50. KLA stock is on the Long-term leaders in IBD list. Nvidia, ASML and Broadcom shares are on the stock market IBD large cap 20.

Dow Jones Futures Today

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

Remember that overnight action Dow Jones Futures and elsewhere does not necessarily translate into real exchanges during the next regular class sotck exchange session.


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Stock market rally

The stock market rally had a rough week due to a CPI inflation report and Middle East fears, with Friday’s losses erasing Thursday’s bullish signals.

The Nasdaq, which hit a record close on Thursday, fell 1.6% on Friday. stock market trading to end the week with a loss of 0.45%. The composite finished below the 21-day line but just above the 50-day and 10-week lines. It is also still trading with the big reversal day of April 4th.

The rest of the market looked worse.

The S&P 500 Index fell 1.55% for the week, below the 21-day level. The benchmark index closed just above its 50-day line but below its 10-week line.

The Dow Jones Industrial Average fell 2.4% to its lowest level since late January, while the small-cap Russell 2000 index fell 2.9% to its lowest level since late February. Both are clearly below 50 days.

The Invesco S&P 500 Equal Weight ETF (RRSP) fell 2.6%, crossing the 50-day line on Friday. The First Trust Nasdaq 100 Equal-Weighted Index ETF (QQEW) fell 1.7%, below the 50-day line, reaching its worst levels since late February.

Crude oil fell 1.4% to $85.66 a barrel for the week, retreating from Friday’s intraday high of $87.67. Gold rose 1.3% to $2,356.20 an ounce, also well off Friday’s highs.

The 10-year Treasury yield jumped 12 basis points to 4.5%, with Thursday’s peak of 4.59% a five-month high. Investors see only a small chance of a Fed rate cut in June and are only leaning towards a decision in July.

The stock market fear indicator soars

The CBOE volatility index jumped 16.1% to 17.31 on Friday, with a session peak at 7:20 p.m., the highest since the end of October. Excessive fear could portend at least a short-term bottom. But the market fear gauge is still a long way from its October highs, let alone its Covid highs.

Another sentiment indicator, notably the bulls and bears readingwas near excessive bullish levels early last week.

If tensions in the Middle East ease, there could be a rebound in stocks. But a direct Iran-Israel conflict could trigger a much greater surge of fear and a significant pushback in actions.

AND F

Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (VAT) fell 1.7% over the week. The VanEck Vectors Semiconductor ETF (SMH) slipped 0.9%. Nvidia and Taiwan Semiconductor are SMH’s largest holdings, with ASML, Lam Research, KLA and AMAT also holding shares.

SPDR S&P Metals & Mining ETF (XME) fell 1% last week. The Global X US Infrastructure Development ETF (PAVE) fell 3.4%. US Global Jets ETF (JETS) fell by 2.6%. SPDR S&P Homebuilders ETF (XHB) fell by 4%. The Energy Select SPDR ETF (XLE) fell 2% and the Health Care Select Sector SPDR Fund (XLIV) lost 3%. The Select Industrial Sector SPDR Fund (XLII) lost 2.2%.

The Financial Select SPDR ETF (45) fell 3.6%, with JPMorgan as a major component. The SPDR S&P Regional Bank ETF (CREATE) fell by 3.5%.

Reflecting more speculative stocks, ARK Innovation ETF (ARKK) fell 1.25% last week and ARK Genomics ETF (ARKG) slipped 3%.


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ASML, Taiwan Semi-profits

Dutch chip equipment giant ASML will report Wednesday morning and chip foundry giant Taiwan Semiconductor is scheduled to visit early Thursday.

Analysts expect ASML’s profits to fall in the first quarter, but forecast a recovery in the second half. Taiwan Semi’s profits are expected to be flat, although unofficial targets could be higher after the foundry giant reported better-than-expected first-quarter sales on April 10.

Taiwan Semi benefits from strong demand for AI and other advanced chips. TSMC’s guidance on profits and capital spending will be key for the industry.

ASML stock fell 1.8% to 961.84 last week, closing right around the 50-day and 10-week lines. He now has a flat base with a buy point of 1,056.34. Investors could use a trendline entry around 1,000 to start a position from the 10-week mark, or the April 1 high of 1,002.66.

TSM stock rose 0.85% to 142.56 for the week. Stocks have been consolidating for a few weeks, but need another week for a proper base. Investors could use the April 10 high of 148.43 as an entry if Taiwan Semi stock rebounds on earnings.

Chip Stocks

Nvidia shares edged up 0.2% to 881.86 for the week. Stocks rebounded from the 10-week line Wednesday through Thursday before paring gains Friday, still holding onto the 21-day line. NVDA stock now has a flat base with a 974 point of purchase. At this point, investors could use Thursday’s high at 907.39 as an early entry.

Broadcom stock edged up 0.35% to 1,344.07 for the week, finding support at the 21-day and 10-week lines amid still tight closes, but reaching resistance near the level of 1,400. AVGO stock is now consolidated, with the April 4 high of 1,403.98 serving as a buy point.

Lam Research stock fell 1.2% to 957.04 for the week, finding support at the 10-week line. Shares have a fixed buy point of 1,007.39, according to Market increase. Lam has his own earnings due on April 24.

Applied Materials stock was unchanged at 207.86 for the week, trading closely around the 21-day line. Investors could view the recent consolidation as a de facto flat base with a buy point of 214.91. A three tight weeks The setup gives a slightly lower entry at 213.33 based on the April 11 high.

KLAC stock fell 0.3% to 680.78, right around the 50-day and 10-week lines. KLA has a flat base buy point of 729.15. A decisive move from the 50-day line could offer early entry. KLA revenue is due on April 25.

What to do now

After Thursday’s strong action, the market was expected to continue rising, particularly the Nasdaq and leaders such as Nvidia.

Instead, there was a big retreat on Friday. A direct Iran-Israel conflict is a wild card, while JPMorgan and Arista have not helped.

But whatever the reason, it’s still a sideways market for the Nasdaq, and it’s difficult to navigate. For the Dow and Russell 2000 – and perhaps the S&P 500 – this is looking more and more like a pullback or an emerging correction.

Investors need to reassess after Friday and last week. If you took new positions between Wednesday and Thursday, you may need to reduce them or exit them altogether.

There is still time to work on watch lists. If the noise of war fades and the feedback on upcoming profits is positive, you’ll want to be ready. But you also need to be willing to scale more aggressively.

With earnings season underway, know when your holdings will be released. You also need to know when your holdings’ main competitors, customers and suppliers are available.

Read The big picture every day to stay in tune with the direction of the market and the main values ​​and sectors.

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

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