Dow Jones futures rose slightly late Wednesday, along with S&P 500 futures and Nasdaq futures. The stock market rally had a mixed session Wednesday, but the Nasdaq hit a record high. AMD stock, Shopify (SHOP) and Etsy (ETSY) were among those flashing buy signals. But a key gauge suggests investors are getting too bullish.
Dow Jones giant Salesforce.com (CRM) reportedly is in talks to buy Slack (WORK), a work-from-home play. The deal would bring CRM stock into great competition with fell Dow giant Microsoft (MSFT), while perhaps spurring other cloud-related M&A.
Dow Jones Futures Today
Dow Jones futures were a fraction above fair value. S&P 500 futures climbed 0.1%. Nasdaq 100 futures rose 0.3%.
While the stock market is closed for Thanksgiving in the U.S., exchanges around the world will be open. Dow Jones futures will trade overnight until 1 p.m. ET Thursday, then resume trading at 6 p.m.
On Friday, the stock market will close at 1 p.m. ET.
Coronavirus cases worldwide reached 60.71 million. Covid-19 deaths topped 1.42 million.
Coronavirus cases in the U.S. have hit 13.13 million since the epidemic’s start, with deaths above 268,000. Deaths topped 2,300 on Wednesday, the most since early May.
Stock Market Rally
The stock market rally finished mixed Wednesday, but growth took the reins.
The Dow Jones Industrial Average fell 0.6% in Wednesday’s stock market trading, with CRM stock a notable drag. The S&P 500 index dipped 0.2%, just below all-time high levels. The Nasdaq composite rose 0.5%, hitting an all-time high intraday.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 0.8%. The iShares Expanded Tech-Software Sector ETF (IGV) gained 1.1%, despite the sizable decline in its component CRM stock and the flat action for Microsoft. The VanEck Vectors Semiconductor ETF (SMH) lost 1 cent, even with AMD stock a notable component. The Renaissance IPO ETF (IPO) rallied 3.7% to a new high.
Bullish Sentiment Excessive?
The latest bulls vs. bears reading showed that 64.6% of investment newsletter writers are bullish. That’s the highest level since January 2018. Bullishness can stay above 60% for several weeks, though the last few times it’s poked above 60 the stock market rally quickly came under pressure.
Psychological gauges such as bulls vs. bears are secondary indicators vs. the primary indicators of the major indexes and leading stocks. Right now the primary indicators signal a solid stock market rally, though some IPOs are starting to look frothy. The psychological indicators could provide an extra reason to take partial profits on stocks that are greatly extended from moving averages. And, if the market starts to show weakness, such gauges can be useful in deciding how much defensive action to take.
Salesforce-Slack Deal Soon?
Salesforce reportedly is in talks to buy collaboration software maker Slack, according to multiple reports. A Salesforce-Slack deal, which could be announced next week, would be among the biggest software takeovers ever. WORK stock spiked 38% to 40.70, giving it a $23 billion valuation.
CRM stock investors were less excited. Salesforce stock fell 5.4% in heavy volume, tumbling below its 50-day moving average. The relative strength line for CRM stock fell to its lowest levels since July. The RS line, the blue line in the charts provided, tracks a stock’s performance vs. the S&P 500 index.
A Salesforce-Slack deal would step up competition with Microsoft, which competes vs. Slack with its Teams software offering. Microsoft stock edged up 1 cent to 213.87. A Slack deal also could spur more software M&A, especially in the cloud or work-from-anywhere fields.
AMD stock rose 1.9% to 86.73. The chipmaker has an early entry of 87.15, with an official double-bottom buy point of 88.82, according to MarketSmith analysis. Investors already could have bought AMD as it rebounded from its 10-week line and broke a downtrend line. It’s still actionable right now, but the 87.15 entry seems to be a resistance area.
AMD has had a trend this year of tiptoeing past various buy points only to slip back, before finally breaking out decisively. Meanwhile, while AMD looks OK, other data-center chipmakers such as Nvidia (NVDA) are looking more sluggish.
Etsy stock jumped 5.4% to 145.09, breaking a downward trend line. It’s also above its old buy point of 141.51. That entry is no longer valid, but it’s something to note. The official buy point is 154.98.
Shopify stock rose 5% to 1,019.52, retaking the 50-day line and breaking a downtrend, both offering early entries. Another early entry is 1,130.10, with the official buy point 1147.01. However, the RS line for Shopify stock has lagged since early July. Also, SHOP stock has reclaimed its 50-day line several times in the past two months, but quickly retreated below that key level.
With Shopify and Etsy stock, the holiday shopping season is huge, but figuring out the winners and losers may not be clear for weeks.
Twilio rallied 4.6% to 305.50 on Wednesday. Shares rebounded from their 10-week line on Nov. 19, then edged past a trend line the next day, both early buy signals. Twilio stock this week found support at that trend line and its 21-day exponential moving average, moving to the high of that mini-consolidation on Wednesday. The official buy point is 341.80.
PayPal stock rose 4.1% to 214.46, extending this week’s strong gains. Shares broke a trend line Monday as they rallied from the 10-week line. On Tuesday, PYPL stock topped a 205.02 alternate entry. Shares hit a record 216.07 intraday before paring gains. That briefly topped the traditional buy point of 215.93 from the not-quite-a-cup base.
Meanwhile, several other software makers broke out or flashed new or ongoing buy signals Thursday, including fresh IPO Snowflake (SNOW) and the cybersecurity trio of CrowdStrike (CRWD), Zscaler (ZS) and Okta (OKTA). But they all have earnings next week, along with Salesforce. Buying right ahead of earnings can be highly risky.
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