The stock market witnessed a mixed week with various indices showing different trends. Dow Jones futures were flat on Monday morning, while S&P 500 and Nasdaq futures fell slightly. This week's stock market rally had its ups and downs, but all major indexes hit fresh highs at some point, driven by strong tech earnings. Treasury yields fell due to tame economic data, boosting expectations of another Fed rate cut on Dec. 18.

Unraveling the Dynamics of the Stock Market

Overview of Dow Jones Futures

Dow Jones futures were just above fair value. S&P 500 futures lost about 0.1%, and Nasdaq 100 futures declined 0.2%. The 10-year Treasury yield rose to 4.18%, and crude oil futures increased by more than 1%. Bitcoin fell to above $98,000 after reaching the $100,000 level last week. In Hong Kong, the Hang Seng jumped 2.8% as China pledged more proactive fiscal and moderately easier monetary policies to boost consumption. Copper prices also rose on the China stimulus pledge. It's important to note that overnight Dow futures action doesn't necessarily translate to actual trading in the next regular session.

The Nasdaq led the way, with the 20,000 level acting as a magnet. However, the tech-heavy composite is starting to look extended, and market sentiment is becoming frothy. Nvidia (NVDA), Apple (AAPL), Meta Platforms (META), and Microsoft (MSFT) are all showing buy signs. However, Nvidia stock fell on Monday morning due to a China probe on anti-monopoly grounds. Nvidia and Meta stocks are on the IBD Leaderboard, and Meta is also on SwingTrader. Microsoft stock is on IBD Long-Term Leaders, and Nvidia stock is on the IBD 50.

Stock Market Rally and Its Impact

The stock market rally had a mixed week. The Dow Jones Industrial Average fell 0.6%, but hit a fresh all-time peak on Wednesday. The S&P 500 index rose nearly 1%, and the Nasdaq composite jumped 3.3%, setting records on Friday. The small-cap Russell 2000 declined 1.1%. The 10-year Treasury yield declined four basis points to 4.15%, reaching the lowest levels since late October. U.S. crude oil futures fell 1.2% to $67.20 per barrel.

The Nasdaq is within 1% of the 20,000 level, one month after topping 19,000 for the first time. While it's not yet overly extended, when it gets 5%-6% above the 50-day line, the risks of a pullback start to rise. The S&P 500 is not as extended, only 3.7% above its 50-day. Sentiment indicators are also raising concerns. The Investors Intelligence Bulls vs. Bears survey shows 62.9% of investment newsletters bullish, which is a sign of excessive bullishness. The CBOE Volatility Index hit its lowest reading since July 19.

ETF Performance and Market Trends

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.55% last week. The iShares Expanded Tech-Software Sector ETF (IGV) leaped 5%, with Microsoft as a major holding. The VanEck Vectors Semiconductor ETF (SMH) gained 2.7%, with Nvidia stock as the dominant component. ARK Innovation ETF (ARKK) soared 8.5% last week, and ARK Genomics ETF (ARKG) climbed 1.85%. SPDR S&P Metals & Mining ETF (XME) plunged 4.8%, U.S. Global Jets ETF (JETS) ascended 4.1%, SPDR S&P Homebuilders ETF (XHB) gave up 3.1%, the Energy Select SPDR ETF (XLE) tumbled 4.7%, and the Health Care Select Sector SPDR Fund (XLV) declined 2.1%. The Industrial Select Sector SPDR Fund (XLI) retreated 2.4%, and the Financial Select SPDR ETF (XLF) shed 1.8%.

These ETF movements reflect the overall market trends and sector performances. It shows how different sectors and stocks are responding to various market conditions. Investors need to closely monitor these ETFs to understand the market dynamics and make informed investment decisions.

Key Stocks and Their Movements

Nvidia stock fell about 2% to under 140 early Monday, back below the 140.76 buy point and the 21-day line but still above the 50-day moving average. It rose 3% to 142.44 last week, rebounding from the 50-day to move back into buy range. China has launched a probe into Nvidia on suspicion of anti-monopoly breaches.

Apple stock climbed 2.3% to 242.84 for the week, moving above a 237.49 buy point from a flat base next to another consolidation. Meta stock jumped 8.6% to 623.77, clearing a 602.95 flat-base buy point. The Facebook and Instagram parent rose 2.4% on Friday as a federal court upheld a looming U.S. ban of TikTok. Meta also launched its latest large language model, Llama 3.3. Microsoft stock gained 4.75% to 443.57, rebounding from all its moving averages and later topping short-term highs.

What to Do in the Current Market

The stock market rally is performing well, with tech and other growth plays leading the way. Some buying opportunities still exist. If fully invested, one might need to cut something to take a new position or add to a holding. The market, especially the Nasdaq, is starting to look stretched. While it's not the time for proactive selling alone, it's a factor to consider when deciding whether to take profits in extended stocks.

Earnings season is past its peak, but there are quality stocks among the limited quantity. Toll Brothers (TOL), Broadcom (AVGO), Oracle (ORCL), Costco (COST), Ollie's Bargain Outlet (OLLI), and Adobe (ADBE) are key earnings reports this week, along with Nvidia chipmaker Taiwan Semiconductor (TSM) reporting monthly sales. All but Costco stock, which is extended, are trading near buy points or early entries.