When opening bell rings at the New York Stock Exchange on Monday, May 10, 2021, which stocks should you be watching? TurboTrading's Robert Knight shares his ideas in his "Stocks to Watch" article the night before each NYSE trading day. Interested in the full report? Take a free TurboTrading 1-Week Trial to get a taste, or become a paid TurboTrading Member to get the Stocks to Watch List. Here is the free sample:
May 10, 2021
SPY: The index makes a new ATH after a very choppy past 2 weeks. With ATHs on the DOW and the DJ-Transportation, another major buy signal is signalled according to Dow Theory. There continues to be a strong sector rotation out of tech stocks and high beta stocks into more "old economy" stocks. Financials, shipping and consumer staples are strong. Commodity stocks also are coming into favor with underlying strength in the commodities themselves; copper, oil, lumber, gold and agriculture. These are all signs of a strong global economic recovery.
NDX: The NDX double topped in April and sold off to lateral support. On Friday it did gap up perhaps making an island reversal pattern. But technology stocks are under pressure on the short term. The index does remain in a strong rising channel and the chart, on the long term, remains bullish.
DOW: The DOW again traded to new ATH. After a 3 week consolidation the trend is back underway. Many think the DOW is irrelevant with such a small universe. Yet the strength of the stalwarts continues to signal underlying strength in the world's major economies. The bull market trend remains intact.
DJ-Transportation: The Trannies continue to soar trading to new ATHs almost daily. The shipping sector is a big driver for index. Again, transportation is forecasting strong economic growth worldwide. The index has moved 30% since we said, "BTD" back at the end of January. It at the top of the longer term channel so may be vulnerable to a pull back, But, the trend is your friend and the bull market is intact.
IWM: The IWM may have made a reversal last week holding support at $220 (lateral support, rising channel line and 50 day m.a.). It is in a large consolidation pattern for the last 3 months. If it breaks below $208 then it is a head and shoulders pattern and negative for stocks. But, over $230 and $235 and the bull market for small caps continues. For now, the chart is in a precarious position and could go either way. But with the strength of larger indices, the small and mid cap stocks should get pulled along and trade to new ATHs over the next month or so. Time will tell.
FAS: The FAS tagged our $120 target from a $53 entry. As predicted, it has caught up to the rest of the market and is now a leader. The sector is very strong as rising rates are good for banks. Higher interest rates at the long end of the bond market show economic expansion also good for banks. The ETF is trading at ATHs and is in a strong rising channel. Look for continuation to $140 and $160 for the ETF.
LABU: The biotech sector remains under a lot of selling pressure. On Thursday we may have had a "capitulation" trade with the ETF selling off to support on huge volume and then bouncing on Friday. We will see if we get a reversal as the ETF remains in a strong down trending channel. If it fails at $70 then it could trade down to $50 and $40. For now, I am avoiding the sector.
SMH: The tech sector remains under pressure. The SMH made a double top (Feb/April) and now is making lower highs. It did break below the rising channel line briefly but has now traded back up through it. The 20 day m.a. average remains above the 50. The chart is, at best, neutral and could go either way.
GUSH: Commodity stocks are surging as an indicator of world economic expansion. Oil broke out of a down trending channel in April and is now up against resistance at $78 area. This new trend looks to be the start of wave 3 in a large 5 wave pattern. Look for GUSH to trade to $100 and $135 over the next 6 months.
NUGT: Gold stocks have broken out of a long term declining channel. On Friday the ETF traded up through lateral resistance. This is the start of a new bullish trend for the sector. On the short term look for the ETF to trade to $80 and $90.
Technical Indicators: Stocks trading above their 40 day moving average (59.65%) and the McClellan Oscillator (+41.89) remain neutral. Markets are not over bought nor oversold. That bodes well for markets with indices trading to new ATHs. It show that there is a lot of energy available for the general market to catch up and continue to drive the bull market. With VIX under 20 (16.69) it also flashes bullishness in the market. Bias is to the upside on the short term for markets.
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