Dow Jones futures are not yet trading Sunday, along with S&P 500 futures and Nasdaq futures. President Donald Trump's China tariff threat put pressure on the coronavirus stock market rally has week. But several stocks flashed relative strength on Friday. Apple (AAPL), Facebook (FB), ServiceNow (NOW), PayPal (PYPL) and Datadog (DDOG) are all Blue Dot specials.
XPresident Trump's threat to reignite a China trade war in the middle of a global recession and pandemic sent the major indexes sharply lower on Friday, wiping out once-solid weekly gains. The coronavirus stock market rally has been surprisingly strong in the face of unprecedented economic shutdowns. If Trump tariff talk continues, the market rally will have a tough time holding up.
What Is A Blue Dot?
What does that mean? Marketsmith has a new list —RS Line Blue Dot — that puts a blue dot on stocks in bases with their relative strength lines hitting new highs. The RS line, the blue line in the charts provided, tracks a stock's performance vs. the S&P 500 index. RS lines hitting new highs while or before a stock breaks out is very bullish.
Investors can find the RS Line Blue Dot list via the Open Stock Ideas button on the top right of any Marketsmith chart. In addition to lists of new and recent breakouts and stocks near buy points, investors can click on the Blue Dot list.
Apple stock has a blue dot on its RS line on a weekly chart. AAPL closed just in buy range on Friday. Facebook stock, ServiceNow stock, PayPal stock and Datadog stock have blue dots on their RS lines on both daily and weekly charts. FB stock, NOW stock and PYPL stock are not quite at buy points. DDOG has some distance from a traditional buy point, but the 2019 software IPO stock is above an aggressive entry point.
Facebook stock and ServiceNow stock surged last week on earnings. PayPal stock has earnings this week, but got a boost last week from Mastercard (MA) earnings and comments. Apple earnings topped views, but AAPL stock fell amid Friday's stock market retreat on Trump tariff concerns.
ServiceNow stock is on IBD Leaderboard. Apple stock is on the Leaderboard watchlist and is on SwingTrader. Facebook stock and ServiceNow stock are on IBD 50.
Dow Jones Futures Today
Dow Jones futures won't begin trading until 6 p.m. ET, along with S&P 500 futures and Nasdaq 100 futures. Overnight volatility has cooled somewhat during the coronavirus stock market rally after wild action during the market crash. But big gains and losses are not unusual.
The prospect of early morning Trump tariff tweets, along with earnings season and general Covid-19 news raise the prospect of whipsaw action from dusk til dawn.
In other news, Warren Buffett sold his airline holdings, with Berkshire Hathaway (BRKB) disclosign Saturday that it has dumped all shares of American Airlines (AAL), Delta Air Lines (DAL), United Airlines (UAL) and Southwest Airlines (LUV).
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Coronavirus News
Coronavirus cases worldwide are at least 3.5 million. Covid-19 deaths have topped 245,000.
Coronavirus cases in the U.S. have reached 1.16 million, with deaths above 67,000.
Secretary of State Michael Pompeo said on ABC's "This Week" that there is "enormous evidence" that the coronavirus outbreak began in a Wuhan lab. That could add to U.S.-China tensions and provide fodder for new Trump tariffs as retaliation.
Shortly before Friday's stock market close, the FDA gave emergency authorization to the Gilead Sciences (GILD) drug remdesivir for treating coronavirus patients. Recent data suggest remdesivir speeds up patient recovery. Gilead stock slightly pared Friday's losses on the FDA news, then rose slightly in late trading. GILD stock is in a very messy base.
The overall stock market didn't react much Friday afternoon to the Gilead news. Prior headlines on Gilead's remdesivir had triggered stock market rally gains or losses, but the FDA emergency OK wasn't a surprise.
On Sunday, Gilead CEO Daniel O'Day said, "We've donated the entire supply that we have within our supply chain," with remdesivir available to patients as early as this week.
Coronavirus Stock Market Rally
The coronavirus stock market rally last Wednesday powered to fresh highs for its run, but then retreated Thursday and especially Friday on the Trump tariff threat.
The Dow Jones Industrial Average and S&P 500 index closed the week down 0.2% The Nasdaq composite retreated 0.3%. It was the second straight week of slim losses, though the prior week ended on a high note.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) slid 0.8%. The iShares Expanded Tech-Software Sector ETF (IGV) rose 0.5%, helped by ServiceNow stock. The VanEck Vectors Semiconductor ETF (SMH) fell 3.4%. Chip stock sold off hard on Thursday and Friday. Renewed Trump tariffs on China would hit chips especially hard. Semiconductors were big losers in Trump's prior China trade war.
Apple Stock
Apple stock cleared a 288.35 cup-with-handle buy point on Thursday. Following Apple earnings that night, AAPL stock rose intraday Friday but closed slightly lower, at 289.07. The RS line for Apple stock is just below record highs on a daily chart, but is at highs on a weekly chart. That's why it's a Blue Dot special, with the blue dot on the relative strength line.
ServiceNow Stock
ServiceNow stock jumped 12% last week to 339.51. Most of that gain came Thursday, on strong ServiceNow earnings, nearly hitting a record high. NOW stock retreated modestly Friday, but its RS line still hit new highs intraday on daily and weekly charts. ServiceNow stock is near a 363.05 buy point from a cup base. A handle would help shake out weak holders, but would only slightly lower the entry price.
Facebook Stock
Facebook stock gapped just above a downward-sloping trend line after earnings last week. An aggressive investor could have used that as an early entry for FB stock, though it dipped just below the trend line on Friday. For now, Facebook stock has a 224.30 cup-base buy point, but perhaps it could form a handle around its current level
PayPal Stock
The clear leader in the payments space. PayPal stock has a cup base with a 124.55 buy point. PYPL stock nearly hit that entry last week but pulled back. It could be working on a handle, but it wouldn't be valid until Wednesday's close.
PayPal earnings are late Wednesday. Analysts expect PayPal earnings to fall 4% to 75 cents a share, with revenue up 15% to $4.74 billion.
Datadog Stock
IPO stock Datadog has a 50.22 entry from a deep cup base, DDOG stock is 10% below its old high.. But the RS line for Datadog stock is already at a record high. DDOG crossed a downward-sloping trend line last week, offering an early entry for aggressive investors.
After six straight weekly gains, a Datadog stock pullback would be normal. That could offer a chance to build a handle, offering a lower, official buy point for DDOG stock.
Datadog runs a cloud-based monitoring and analytics platform for software developers and IT departments.
Datadog is now sporadically profitable. Analysts expect slim losses for 2020 and 2021, but the IPO stock only needs to beat views slightly to report profits. Datadog will release Q1 results on May 11.
Coronavirus Stock Market Rally Analysis
Stepping back, the Dow Jones today and overall coronavirus stock market rally look fine when looking at weekly charts of the major indexes and leading stocks. The stock market rally has run up very fast. It would not be a surprise to see the Dow Jones and other major indexes move sideways or pull back for several weeks. Despite the big daily ups and downs, the S&P 500 and other major indexes have ultimately closed slightly lower for two straight weeks. As noted in the latest weekly Stock Market Update, the Nasdaq and other indexes have formed three-weeks-tight patterns.
From a news perspective, there's a question of how much the coronavirus stock market rally and the U.S. economy can take. The market rally has been pricing in a summer economic recovery even as the U.S. plunges into its sharpest contraction since the Great Depression. There have been some tentatively encouraging economic data from late April, as well as comments from Facebook, Mastercard and others that conditions are starting to stabilize. No doubt stimulus checks, other coronavirus rescue aid and massive Federal Reserve efforts are playing a role.
Trump Tariff Threat
But if President Trump revives a China trade war, the impact on the global economy and supply chains would be massive. Of course, there's a difference between a Trump tariff threat and the president actually imposing new China tariffs.
While investors should be aware of the geopolitical events, don't try to impose your hopes, fears and opinions on the coronavirus stock market rally. It won't work. Instead, listen to what the stock market is doing 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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