Is Stock Market Rally Overheating? Bitcoin Surges On Tesla News| Investor’s Business Daily

Dow Jones futures, along with S&P 500 futures and Nasdaq 100 futures, were mixed late Monday, as the stock market rally set more record highs. Bitcoin surged over 18% after Tesla purchased $1.5 billion worth of the cryptocurrency. Tech titan Nvidia and Dow Jones leader Disney broke out past new buy point.


The stock market added to last week’s torrid gains, as the tech-heavy Nasdaq composite rallied 0.95%. The S&P 500 moved up 0.7%, while the Dow Jones Industrial Average climbed 0.8%.

Among the Dow Jones leaders, Apple (AAPL) rallied 0.1%, while Microsoft (MSFT) also rose 0.1%. Apple stock remains below its recent buy point, while Microsoft is now out of buy range. Nike (NKE) is approaching a new buy point after bullishly regaining a key level in recent sessions. Disney (DIS) broke out past a new buy point Monday amid a sharp rise.

Tesla (TSLA) rallied 1.3% Monday on Bitcoin news and is again nearing all-time highs.

Among top stocks in or near buy zones, chip giant Nvidia (NVDA) is in buy range above an early buy point, while Dropbox (DBX) is trying to break out past a new buy point.

Apple, Microsoft and Tesla are IBD Leaderboard stocks. Nvidia was the IBD Stock Of The Day, while Dropbox was Monday’s IBD 50 Stocks To Watch pick. Meanwhile, Nike was featured in this week’s Stocks Near A Buy Zone.

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After the stock market close Monday, Dow Jones futures and S&P 500 inched higher vs. fair value, while Nasdaq 100 futures edged lower. Remember that trading in Dow Jones futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

Late Friday, the House voted to confirm the fast track of President Biden’s $1.9 trillion stimulus package. The budget resolution allows the Biden stimulus plan to pass with a bare majority, instead of needing 60 Senate votes to avoid a filibuster.

President Joe Biden’s Twitter account stressed the importance of acting quickly, “We don’t have a second to waste when it comes to delivering the American people the relief they desperately need. I’m calling on Congress to act quickly and pass the American Rescue Plan.”

Meanwhile, House Speaker Nancy Pelosi said the bill would be passed by the end of the month.

Among exchange traded funds, Innovator IBD 50 (FFTY) jumped 2.4% Monday. The Nasdaq 100-linked Invesco QQQ Trust ETF (QQQ) traded up 0.7%. Meanwhile, the SPDR S&P 500 ETF (SPY) rallied 0.7%.

U.S. Stock Market Today Overview

Index Symbol Price Gain/Loss % Change
Dow Jones (0DJIA) 31385.02 +236.78 +0.76
S&P 500 (0S&P5) 3915.58 +28.75 +0.74
Nasdaq (0NDQC ) 13987.64 +131.34 +0.95
Russell 2000 (IWM) 227.27 +5.62 +2.54
IBD 50 (FFTY) 47.72 +1.11 +2.38
Last Update: 4:36 PM ET 2/8/2021

Stock Market Rally Overheating?

Looking back at the current uptrend, November was a key month for the stock market. IBD’s The Big Picture flagged the new uptrend following the market’s bullish follow-through day on Nov. 4. Meanwhile, the start of February has the Dow Jones Industrial Average, Nasdaq and S&P 500 hitting record highs. But is the stock market rally overheating?

Monday’s Big Picture warned, “Investors who’ve been buying on breakouts can enjoy the fruits of their trades, but have to ask themselves if the stock market is overextended. The Nasdaq and S&P 500 are close to piercing trends lines touching index highs stretching back to November. As the Big Picture has repeatedly noted, the Nasdaq’s gap with its 50-day moving average is dangerously high.”

It continued, “If the stock market will topple, one of the first signs will be erosion in the leading stocks. So far, those premium stocks are holding up well. The IBD 50 rose 1.4% and is near new highs.”

Due to the recent strength, investors can shift back to an offense stance, with an understanding that there are still good reasons for caution. Look for stocks that are breaking out above new buy points, like Disney, Dropbox and Nvidia.

Focus on stocks that showed strong relative strength during the recent weakness. They could be some of the market’s leaders if the indexes are able to continue their record-setting ways.

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Bitcoin Price

The price of Bitcoin surged more than 18% to all-time highs Monday after Tesla said it purchased $1.5 billion worth of Bitcoin for “more flexibility to further diversify and maximize returns on our cash,” according to a SEC filing. The electric-auto leader also said it would start accepting payments in Bitcoin.

The price of Bitcoin reached as high as $47,500 before paring gains to about $46,200 in evening trade, according to Coindesk.

The Grayscale Bitcoin Trust (GBTC) surged over 20%, as it continues to rebound from its 50-day moving average line.

Dow Jones Stocks: Disney, Nike

Dow Jones stock Disney broke out and is in buy range past a 183.50 buy point in a flat base, according to IBD MarketSmith chart analysis. The 5% buy area goes up to 192.68. Disney stock advanced 4.9% Monday.

Disney will report earnings after the close Thursday.

Elsewhere in the Dow 30, Nike is tracing a new flat base with a 148.05 buy point. The stock slipped 1.2% Monday.

Nike shares bullishly regained their 50-day moving average line in recent sessions.

Stocks In Or Near Buy Zones: Dropbox, Nvidia, ServiceNow

Monday’s IBD 50 Stocks To Watch pick, Dropbox, is trying to break out above a 25.26 buy point in a cup base. Shares rallied as much as 3.5% Monday before reversing slightly lower. The stock is just below the new buy point.

According to IBD Stock CheckupDropbox stock boasts a perfect 99 IBD Composite Rating. The Composite Rating — an easy way to identify top growth stocks — is a blend of key fundamental and technical metrics to help investors gauge a stock’s strengths.

Dropbox ranks No. 42 in the IBD 50 list.

IBD Leaderboard stock Nvidia is tracing a flat base with a 587.76 buy point. Shares are just 2% away from the entry amid Monday’s 6.2% advance. But shares are also moving above an early entry at 560.07. Investors could start with a small position at this alternative buy point.

According to Leaderboard commentary, “Nvidia cleared an alternative entry from its January highs. The stock continues to work on a flat or saucer base. Nvidia was cut to a quarter position Jan. 27 but is back to a half with today’s move.”

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Tesla Stock

IBD Leaderboard stock Tesla neared record highs Monday, rallying more than 1% after the company’s Bitcoin news.

The Jan. 8 IBD Stock Of The Day column signaled that Tesla was flashing several signs of a climax top amid a sharply vertical run over the past few weeks. But so far the stock is showing tremendous resilience after hitting record highs in recent weeks.

On Jan. 25, Tesla stock hit a record high at 900.40. Shares are about 84% above a 466 buy point in a cup with handle amid Monday’s action.

Dow Jones Leaders: Apple, Microsoft

Among the top Dow Jones stocks, Apple moved up 0.1% Monday, but remains below its 138.89 buy point in a cup with handle. Shares gave up the entry on Jan. 28.

Meanwhile, Microsoft rallied 0.1% Monday. Shares of the software giant broke out past a 228.22 buy point in recent sessions and are out of the 5% buy zone that goes up to 239.63.

Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the Dow Jones futures.


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