In addition to the Nasdaq and S&P 500 futures, the Dow Jones futures will begin trading on Sunday night.

There was a widespread decline in the stock market rally last week. In an outdoor trading session on Friday, the Nasdaq and S&P 500 indexes set new all-time highs before turning lower.

After becoming historically long, Nvidia (NVDA), the leader in artificial intelligence chips, staged a bearish turnaround on Friday, making itself look like the culprit. The market as a whole felt the effects of that reversal, but AI equities such as SMCI, Arm Holdings, Advanced Micro Devices (AMD), and Taiwan Semiconductor Manufacturing (TSM) were particularly hard affected.

The reverse at Nvidia, which persisted into Friday night, may be an anomaly or a shift in personality following a tremendous run. Those investors who are too happy and too complacent will undoubtedly wake up from their haze.

If your portfolio is heavily invested in artificial intelligence investments, now is the moment to exercise caution and reevaluate it.

On Friday, buy signals were flashed by Brazilian brokerage XP Inc. (XP) and Square parent Block (SQ). It’s looking good for DraftKings (DKNG).

This article lists the stocks of Nvidia and Arm Holdings on the IBD Leaderboard, while SQ stock is on the watchlist. Stocks in Taiwan Semiconductor and Square-parent Block are available on SwingTrader. The IBD 50 includes ARM, DraftKings, and Nvidia. Stocks from Super Micro, Nvidia, and AMD are all part of the IBD Big Cap 20. IBD featured XP as their stock of the day on Friday, and Square was featured on Wednesday.

Nvidia, Square-parent Block, and XP stock are analyzed in the video that is embedded in the post, which also covers the weekly market movement.
Trading on the Dow Jones today

Futures on the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 all begin trading at 6 p.m. ET on Sunday.

Always keep in mind that the overnight fluctuations in Dow futures and other markets do not always reflect the trading activity that occurs during the next normal session of the stock market.

On IBD Live: Stock Market Rally, you can see market analysts and major stocks discussed by IBD professionals.

Following two large sell-offs spearheaded by technology companies, the stock market rise stalled and retreated last week.

Last week, investors saw a 0.9% decline in the Dow Jones Industrial Average. After reaching all-time highs on Friday, the Nasdaq composite fell 1.2% and the S&P 500 index fell 0.3%. There were three distribution days that the Nasdaq experienced this week.

Despite giving up Friday’s gains, the small-cap Russell 2000 advanced 0.5% for the week, reaching levels not seen in 23 months. The small caps, like sector ETFs, show a wide range of investments in the market.

The Nasdaq was stretched heading into Friday, and Nvidia was significantly so. There was an abnormally high level of optimism. Being prepared for a pause

There may be good reasons to buy leading stocks during a market decline. Additionally, investors may be less riskily complacent if an Nvidia slide continues for more than a couple of days.

In its third consecutive week of fall, the yield on 10-year Treasuries fell 9 basis points to 4.09%. More closely linked to Fed policy, the yield on two-year Treasuries fell 5 basis points to 4.48%. The head of the Federal Reserve, Jerome Powell, reiterated this week that there is no hurry to lower rates. That remained unchanged regardless of the jobs report and other economic indicators, but it may have calmed concerns that the Fed may reduce the pace of rate decreases.

Last week, the price of U.S. crude oil futures dropped 2.45% to $78.01 a barrel.
ETFs

A growth exchange-traded fund (ETF) that has recovered from Tuesday’s lows is the iShares Expanded Tech-Software Sector ETF (IGV), which sank 2.3%. Even though top holding Nvidia led a 3.9% negative reversal on Friday, the VanEck Vectors Semiconductor ETF (SMH) nevertheless managed a 2% weekly gain. Additionally, SMH holds large stakes in Taiwan Semiconductor and AMD.

In the past week, XME, the SPDR S&P Metals & Mining ETF, gained 2.1%. The PAVE ETF, which tracks the US infrastructure development, rose 0.8% on the Global X index. U.S. Global Jets (JETS) ended the day unchanged. The SPDR S&P Homebuilders ETF (XHB) saw a small gain of 0.35 percent. There was a 1.2% increase in the Energy Select SPDR ETF (XLE) and a 0.1% increase in the Health Care Select Sector SPDR Fund (XLV).

A lengthy winning streak was extended by the Industrial Select Sector SPDR Fund (XLI), which gained 0.6%. Two exchange-traded funds had gains: the Financial Select SPDR ETF (XLF) and the SPDR S&P Regional Banking ETF (KRE), which both increased by 0.8%.

Last week, ARK Genomics (ARKG) dropped 4% and the ARK Innovation ETF (ARKK) dropped0.8%, both of which reflect equities with more speculative themes.

Applying IBD’s ETF Market Strategy for Market Timing
Stake in Nvidia

The shares of Nvidia closed Thursday at a level not seen since 2003, 41.9% above the 50-day line. Before reverting in a large, outside, negative reversal, shares soared to 974 on Friday morning. In its most heavily traded day thus far, shares fell 5.55 percent to 875.28.

Nonetheless, Nvidia stock rose 6.4% for the week, continuing its streak of nine consecutive weekly advances.

It is still 10.1% above its rapidly rising 21-day line and 32.5% over its 50-day line.

On Friday night, Nvidia stock took a small tumble.

Huge ramifications for the AI sector would result from a more substantial pullback by Nvidia. Among the companies whose shares fell on Friday are AMD, Taiwan Semiconductor, Arm Holdings, and Super Micro Computer. Nvidia was among the stocks that dropped somewhat on Friday night.

On Tuesday, the ARM stock market will be watching as the IPO lockup period ends.

Numerous artificial intelligence (AI) companies, including software companies ServiceNow (NOW), Palantir Technologies (PLTR), Cloudflare (NET), and Datadog (DDOG), will also feel the pressure. Prior to the market reversal driven by Nvidia, ServiceNow and Cloudflare had aggressive entries on Friday morning.

As Friday’s action shown, an Nvidia retreat may significantly affect the market rally due to the company’s size and apparent leadership in artificial intelligence.

Nvidia has clearly been a huge success this year, following huge advances in 2023. It’s possible that NVDA stock may recover fast and continue its ascent to 1,000. Like they did for a few months following their massive extension in late May, shares could go sideways or advance more slowly.

Nvidia should preferably slowly retreat to the 21-day line or establish a new base.

However, AI stock losses may be substantial if Nvidia’s character changed, even temporarily, on Friday.

Tech Behemoths, Cloud Giants, and Chipmakers Engage in a Clash Over Artificial Intelligence Stocks Close to Purchase Points

Friday saw a 4.6% increase in Square-parent Block to 80.74. The official high-handle entry for SQ stock is 83.29, however shares have already surpassed the first buy target of 80.29 after breaking the downtrend of the handle. Just above 80 years ago, there is a great deal of overhead resistance.

Rebounding from the 200-day moving average, XP stock surged 5.9% to 25.31 for the week on heavy volume. Stocks made a bold entrance on Friday, rising just over the 50-day moving average. From a cup-with-handle base, the official buy point for XP stock is 27.02. Since the Brazilian brokerage consolidated a few months ago, the relative strength line has been trailing behind.

To 41.74, DraftKings’ stock price dropped 4.1% last week. After forming a double-bottom foundation, shares have spent the past several weeks consolidating near the 21-day line, which is just above the buy zone. A new flat-base base-on-base configuration should ideally be formed by DKNG stock. The 10-week line would be able to close the margin even further if that happened.
Next Steps

The direction that Nvidia stock takes in the days ahead might have a significant impact on what happens next.

Investors with large gains in artificial intelligence equities have the option to either cash out or wait for a probable decline. There may be more significant choices ahead for investors whose AI stocks haven’t performed well recently.

We need to exercise caution when making new purchases. However, there are a few industries that are thriving apart from AI. In other words, use this weekend to cast a wide net and refresh your watchlists.

Keep in mind that most stocks would decline in a market downturn, while AI stocks might be the most susceptible.

To keep up with the market’s movement and the top stocks and sectors, read The Big Picture daily.