Dow Jones Futures: S&P 500 Regains Key Level, But Stay Cautious; Tesla Doubles U.S. Discount

Dow Jones futures rose slightly after hours, along with S&P 500 and Nasdaq futures. Micron Technology (MU) and You’re here (TSLA) were in focus overnight.




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The stock market rally made solid progress on Tuesday, with Nike (NKE) breaking wave and fedex (FDX) is leading the way in earnings, also supporting some related peers and stocks.

The S&P 500 index rallied just above its 50-day line, a positive but not conclusive sign.

Apple (AAPL) managed to rise modestly, extending a rebound just above the bear market lows on Tuesday. You’re here (TSLA) was unable to pull off a gain, closing slightly lower. Tesla has reportedly doubled its end-of-year delivery discount in the United States

Investors should remain cautious. The market rally remains under pressure and has a bad habit of pulling back after showing strength.

Meanwhile, First Solar (FSLR), Medpace (MEDP), Aehr test systems (AEHR), Impinj (IP) and Schlumberger (SLB) are the major stocks still near their 50-day or 10-week moving averages.

MEDP stock has been added to IBD classification Wednesday, with the PI stock on the rankings watchlist. SLB shares and KLA Corp. are on the IBD Big Cap 20.

Micron Earnings

Micron announced a bigger than expected loss while first-quarter revenue fell 47%. The memory chip giant has guided slightly lower for the current Q2.

Micron said it would continue to cut capital spending. This is not good news for manufacturers of memory-exposed chip equipment Applied materials (AMAT), Research (LRCX) and KLA (KLAC)

MU’s stock fell 2% in extended trade. The shares had climbed 1% to 51.19 in Wednesday’s regular session.

Meanwhile, AMAT and Lam Research shares fell 2% overnight while KLAC shares fell less than 1%.

hard drive manufacturers western digital (WDC), Seagate Technology (STX) fell 2.2% and 1.5% respectively.

Dow Jones Futures Today

Dow Jones futures were up 0.2% from fair value. S&P 500 futures advanced 0.3% and Nasdaq 100 futures climbed 0.35%.

The 10-year Treasury yield fell 3 basis points to 3.65%.

Remember that overnight action in Futures contracts on Dow and elsewhere does not necessarily translate into actual trading over the next stock Exchange session.


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Stock market rally

The stock market rally rebounded on Wednesday, climbing quickly well above 1% and largely holding those gains through the close.

The Dow Jones Industrial Average climbed 1.6% on Wednesday stock market trading. The S&P 500 index rose 1.5%, with Dow Jones giant Nike the best S&P 500 performer of the day. The Nasdaq composite also rose 1.5%. The small-cap Russell 2000 rebounded 1.7%.

Apple stock rose 2.4% to 135.45 on Wednesday, still well below moving averages. On Tuesday, AAPL stock hit 129.89, just above its June bear market low of 129.04.

U.S. crude oil prices rose 2.7% to $78.29 a barrel.

The 10-year Treasury yield remained unchanged at 3.68%.

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From best ETFsthe Innovator IBD 50 ETF (FFTY) rose 2.2%, while the Innovator IBD Breakout Opportunities ETF (FIGHT) was 1.6% higher. The iShares Expanded Tech-Software Sector ETF (VIG) increased by 1.2%. The VanEck Vectors Semiconductor ETF (SMH) climbed 2.2%. Micron stock is a notable holding of SMH, along with chip equipment stocks AMAT, LRCX and KLAC.

Reflecting more speculative history stocks, ARK Innovation ETF (ARKK) climbed 1.7% and ARK Genomics ETF (ARKG) 2.2%. Tesla stock is a major holding in Ark Invest’s ETFs.

SPDR S&P Metals & Mining ETF (XME) jumped 2.6% and the Global X US Infrastructure Development ETF (PAVE) 1.7%. US Global Jets ETF (JETS) increased by 1.3%. ETF SPDR S&P Home Builders (XHB) climbed 1.9%. The SPDR Energy Select ETF (XLE) and the Financial Select SPDR ETF (XLF) rose 1.55%. SPDR Healthcare Sector Fund (XLV) added 1.3%.


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Tesla Delivery Discount

Tesla has started offering $7,500 for U.S. delivery of a Model 3 or Model Y before the end of the year, Electrek reported late Wednesday. That’s up from $3,750 in early December, with 10,000 Supercharger miles free as well. Tesla is trying to boost its delivery numbers in the fourth quarter.

Many potential buyers could delay delivery until January 1, when new US tax credits of up to $7,500 will take effect. Tesla’s sales in the United States could also face a negative impact from Elon Musk’s actions on Twitter and politically charged tweets.

Tesla stock tried to rally on Wednesday but couldn’t end its losing streak on a strong market day. TSLA stock fell 0.2% on Wednesday to 137.57, hitting a new bearish low. The shares are down 8.4% so far this week and 29% in December.

Stocks to Watch

First Solar stock rose 3.5% to 162.06 after falling to 150.25 intraday, finding support just above the 50-day line. FSLR stock is now 5.7% above the 10-week line and just at short-term highs. The solar energy leader could work on a new base, but needs a few more weeks.

MEDP stock rose 3.4% to 210.59, rebounding from the 50-day line and regaining its 21-day line. Investors could buy Medpace shares now or wait for a breakout of the trendline from Nov. 15.

PI stock rose 2.3% to 117.15, continuing to rebound from the 10-week line but only 4% above that level. This RFID chipset is actionable from this pullback following a breakout in earnings at the end of October.

The AEHR climbed 1.3% to 22.80, bouncing off its 50-day line. A move above the 21-day line would offer an entry into the volatile stock. The chip testing company exposed to electric vehicles is seeing meteoric revenue growth.

SLB stock rebounded 3% to 53.31, continuing Tuesday’s rebound from the 50- and 21-day lines. Now clearly breaking a trendline in a short-term consolidation, Schlumberger stock is still exploitable here.

Market rally analysis

OK, now the stock market rally has rebounded. After posting gains on Tuesday, the major indices had a strong session on Wednesday.

The Nike-backed Dow Jones continued to rebound from its 50-day line.

The S&P 500 and S&P MidCap 400 just recovered their 50-day moving averages, but only by a hair. The S&P 500 needs to decisively cross the 50-day line, and that would only be a first step for the market rally.

The Nasdaq and Russell 2000 remain below their 50-day averages.

Other top stocks found support or rebounded from key levels, including First Solar and Aehr Test Systems. Some give flashing buy signals, but in a choppy market.


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What to do now

After last week’s awful reversal week and Monday’s losses, the past two days have been positive, but don’t get excited.

Market exposure should still be light. The uptrend remains under pressure with the S&P 500 at a key level, with several more hurdles ahead.

Even if the market rally recovers much of the previous week’s losses, there is always the risk that it could be another trap to attract investors just before a pullback.

So while a few stocks have issued buy signals, investors should be wary of taking new positions. Yes, if the major indices continue to rebound, the new purchases of the last two days will probably work. But if the S&P 500 falls to Tuesday’s low or worse, these new purchases will likely fail.

If you are trying to play the current market, keep positions small and take at least partial profits quickly. Broad-market ETFs could be a way to participate in a mini-rally without the risk of individual stocks.

But, a lot of stocks are setting up. So investors need to be ready to act, update watchlists and stay engaged.

Read The big picture every day to stay in tune with market direction and key stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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