Market Rally Extends Rebound As Nasdaq Faces Test; Elon Musk’s Tesla Sales Aren’t ‘Enough’ Yet
Dow Jones futures tilted higher overnight, along with S&P 500 futures and Nasdaq futures. The stock market rally on Wednesday extended its bounce from Monday’s lows, with the Nasdaq reclaiming a key moving average and many leading stocks making compelling moves.
Tesla (TSLA) jumped as CEO Elon Musk said he’s “sold enough” shares, though he later disclosed he sold another $528 million worth of TSLA stock. Fortinet (FTNT) and Freeport McMoRan (FCX) are above early entries, while Automatic Data Processing (ADP) is right at various aggressive buy points. Google parent Alphabet (GOOGL) moved back above its 50-day line, on the cusp of various buy points. Meanwhile, fertilizer maker Nutrien (NTR) cleared a base while medical outsourcing firm Icon (ICLR) blasted out of a consolidation.
Tesla, Google, Icon and NTR stock are on IBD Leaderboard. Google stock is on SwingTrader. Google and FTNT stock are IBD Long-Term Leaders. ICLR stock is on the IBD 50.
Dow Jones Futures Today
Dow Jones futures rose 0.1% vs. fair value. S&P 500 futures climbed 0.1% and Nasdaq 100 futures edged higher.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Coronavirus cases worldwide reached 277.51 million. Covid-19 deaths topped 5.39 million.
Coronavirus cases in the U.S. have hit 52.5 million, with deaths above 832,000.
The FDA approved the Pfizer (PFE) antiviral Paxlovid, shown to cut hospitalization by 89% in high-risk Covid patients. A Merck (MRK) Covid pill, which is less effective, also got approval.
Stock Market Rally
The stock market rally advanced and closed around highs for a second straight session.
The Dow Jones Industrial Average rose 0.7% in Wednesday’s stock market trading. The S&P 500 index climbed 1%, with TSLA stock the benchmark index’s top performer. The Nasdaq composite popped 1.2%. The small-cap Russell 2000 climbed 0.9%.
The 10-year Treasury yield fell 3 basis points to 1.46% after big gains over the prior two sessions. Crude oil prices popped 2.3% to $72.76 a barrel.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rebounded 1.9%, while the Innovator IBD Breakout Opportunities ETF (BOUT) climbed 1.4%. The iShares Expanded Tech-Software Sector ETF (IGV) edged up 0.6%, with FTNT stock an IGV holding. The VanEck Vectors Semiconductor ETF (SMH) advanced 1.2%.
SPDR S&P Metals & Mining ETF (XME) picked up 1.5%, with FCX stock a notable component. The Global X U.S. Infrastructure Development ETF (PAVE) was up 0.65%. U.S. Global Jets ETF (JETS) ascended 0.7%. SPDR S&P Homebuilders ETF (XHB) bounced 1.5%. The Energy Select SPDR ETF (XLE) added 0.6% and the Financial Select SPDR ETF (XLF) 0.03%. The Health Care Select Sector SPDR Fund (XLV) inched up 0.5%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) dipped 0.1% and ARK Genomics ETF (ARKG) fell 0.55%. Tesla stock remains the No. 1 holding across ARK Invest’s ETFs.
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FCX stock rose 2.45% to 40.14, clearing short-term resistance and a downtrend in a handle, offering an early entry. Shares of the copper miner have a 41.70 cup-with-handle buy point, according to MarketSmith analysis.
FTNT stock climbed 2.6% to 348.16, extending Monday’s bounce from the 50-day line and just above an early entry. Volume has been light these past two sessions for the cybersecurity leader. Fortinet stock has an official consolidation buy point of 335.45. The relative strength line is hovering near highs after a strong advance, reflecting FTNT stock’s outperformance vs. the S&P 500 index.
Icon stock shot up 7.2% to 307.43, clearing the official buy point of 301.82. But the most important resistance seemed to be around 290-292, in a “draw the line” breakout. From that level, Icon stock is slightly extended. Volume was well above average. The RS line for ICLR stock hit a record high as it was breaking out, making a blue dot special in MarketSmith. The medical researcher is a partner for big drug and device makers. Icon helps identify which drugs to move into clinical testing, and then helps run those studies.
Google parent Alphabet’s stock rose 2.05% to 2,928.30, back above its 50-day line. The 50-day line is a good place to start a position in a Long-Term Leader, but investors might want to see a little more strength. But GOOGL stock is back above an old buy point of 2,925.17. It’s working on a new consolidation that will be a flat base after this week with a 3,019.43 buy point.
Tesla stock surged 7.5% to 1,008.87, getting above the 1,000 level. That followed Tuesday’s 4.3% bounce after round-tripping a 38% gain from a 900.50 cup-base buy point. Shares remain below their rising 50-day line. Even getting above that level might not be enough. A downward-sloping trend line from the top of its new consolidation is one early entry, currently just above 1,100. Assuming Tesla stock continues to climb, a double-bottom base with a 1202.05 buy point will likely develop.
Elon Musk helped spurred Wednesday’s move after saying on a podcast that he’s “sold enough” shares to cover taxes for exercising new options. He clarified around Wednesday’s close that he still has a few more stock sales to go under a preprogrammed plan. Late Wednesday, Musk disclosed in an SEC filing that he had sold another $528 million worth of Tesla stock.
NTR stock gained 2.8% to 74.22 in heavy volume, clearing a 73.60 buy point from a flat base within a base-on-base formation. A base-on-base pattern is especially bullish in weak or choppy markets.
ADP stock, riding the coattails of Paychex earnings, popped 2.4% to 237.62, continuing a bounce from the 50-day line. The payroll processing firm is just above a downward-sloping trend line and the Dec. 13 high of 237.29. ADP stock is on track to have a flat base after this week with a 241.28 buy point.
Market Rally Analysis
The stock market rally had a solid showing Wednesday after Tuesday’s strong rebound.
The Nasdaq composite just cleared its 50-day moving average and closed right on a downward-sloping trend line. This is positive action, but it’s also exactly where you’d expect the market to face some resistance. Investors want to see the Nasdaq clear this area, though a pause for a day or two or three would be positive. However, the Nasdaq also could easily return to Monday’s lows.
The Dow Jones reclaimed its 50-day line. The S&P 500, which is still in a confirmed uptrend, extended its move above the 50-day and 21-day lines, and isn’t far from all-time highs. The Russell 2000 remains below its 50-day and 200-day lines.
Market breadth remains weak, despite winners beating losers for a second straight session. New highs edged new lows on the NYSE, but continued to lag badly on the Nasdaq.
Market Leadership Emerging
Still, market leadership is showing tentative signs of broadening out.
Travel stocks extended gains and several flashed buy signals. Medical stocks have been acting well, with several above, in or near buy zones such as Icon, Iqvia (IQV) and Edwards Lifesciences (EW). Networking stocks are doing well, including Arista Networks (ANET) and Cisco Systems (CSCO). Chips are holding up, with several near potential entries. Software is fighting back, with a handful at or near early entries such as FTNT stock. A few metal miners are doing well, such as FCX stock and especially Alcoa (AA). Tesla and Ford Motor (F) are standouts in autos, though they may not be actionable now. Trucking firms have held up reasonably well and many are finding or trying to find support at their 50-day lines.
But let’s not oversell the strength. While some stocks have cleared legitimate entries and made some solid gains, many more are bouncing off lows and are still below aggressive buy points or just above them. Don’t assume that these positive hints necessarily indicate they will develop into full-blown market leaders.
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What To Do Now
The beauty of a strong market uptrend is that the market and most stocks will tend to trend up. If you buy a leading stock on a breakout or other entry, the odds are high that the trade will work.
That is simply not the case today. Trying to make money in a choppy market is a guessing game. If the market rises one day, you can try to get in early, but bad markets often have great one-off days followed by quick reversals lower. Wait for a little more market momentum? That may be the moment when the indexes head south again.
Step in gingerly if you do make new buys. If the market weakens again, you can step back out with minimal pain. If your stocks and the market continue to show strength, you can gradually add to your exposure.
Remember, there is nothing wrong with doing nothing right now. If the stock market rally has real legs, you’ll have plenty of opportunities after the holidays.
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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