Dow Jones futures were little changed after hours, along with S&P 500 and Nasdaq futures.
The stock market rally showed divergent action on Tuesday, with the Dow Jones rallying, the Nasdaq plummeting and the S&P 500 somewhere in between.
On the positive side, the Dow Jones giant caterpillar (CAT), Deere (OF), ATI (ATI), Freeport-McMoRan (FCX) and Schlumberger (SLB) are industrial, metallurgical, mining and energy deposits in or near buy points. Underlying commodity prices rose solidly on Tuesday, helped by China continuing to roll back Covid restrictions.
Dow Jones Futures Today
Dow Jones futures were up 0.1% from fair value. S&P 500 futures rose 0.1%. Nasdaq 100 futures were flat, with TSLA stock extending losses overnight.
Stock market rally
The stock market rally had a mixed session, with industrial and metal stocks holding or rising while growth plays struggled.
The Dow Jones Industrial Average edged up 0.1% on Tuesday stock market trading. The S&P 500 index fell 0.4%, with Tesla stock the worst performer on the day, followed by Moderna and Nvidia. The Nasdaq composite fell 1.4%. Small cap Russell 2000 fell 0.7%.
Apple stock fell 1.4% to 130.03. Intraday, the AAPL hit 128.76, just below its bear market low.
Tesla stock plunged 11.4% to 109.01, its worst one-day loss in 11 months, amid a factory shutdown in Shanghai, weak China sales data and other news. TSLA stock has now crashed 44% this month to the lowest levels since August 2020. Volume has been very high all month, signaling institutional selling. TSLA stock fell slightly in extended trade.
Nvidia stock fell 7.1% to 141.21, dropping below its 50-day line. NVDA stock fell 19% from its December 13 intraday high at 187.90.
ARNM stock fell 9.5% to 180.17, falling below 188.75 mug with handle point of purchase, depending MarketSmith Analysis. Moderna exploded out of that base on Dec. 13 on bullish cancer vaccine trial data, climbing 20% that day and hitting 217.25 the following session. But the mRNA stock has gone 15% and up and back.
ENPH stock fell 6.6% to 274.54, now well below the 50-day line after breaking above that level on Friday.
U.S. crude oil prices fell 3 cents to $79.53 a barrel after rising above $80 on Tuesday morning.
The 10-year Treasury yield jumped 11 basis points to 3.86% after climbing 27 basis points last week.
From best ETFsthe Innovator IBD 50 ETF (FFTY) fell 0.5%, while the Innovator IBD Breakout Opportunities ETF (FIGHT) climbed 0.7%. The iShares Expanded Tech-Software Sector ETF (VIG) fell 0.6%. The VanEck Vectors Semiconductor ETF (SMH) fell 1.8%. NVDA stock is a major holding of SMH.
The SPDR S&P Metals & Mining ETF (XME) increased by 0.8%. Both FCX and ATI stock are XME components. The SPDR Select Industrials ETF (XLI) edged up 0.3%, with Caterpillar and DE shares both the top 10 holdings.
The US ETF Global Jets (JETS) fell 1.3%. SPDR S&P Home Builders (XHB) fell 0.3%. The SPDR Energy Select ETF (XLE) rose 1.1%, with SLB stock a key contributor. The SPDR Financial Select ETF (XLF) was just below the break-even point. SPDR Healthcare Sector Fund (XLV) lost 0.3%.
Mirroring stocks with more speculative stories, ARK Innovation ETF (ARKK) fell 4.15% to a new five-year low. ARK Genomics (ARKG) fell 3.8%, approaching the low of the June bear market. Tesla stock remains a major holding in Ark Invest’s ETFs.
Stocks to Watch
Caterpillar stock rose 1.4% to 243.14, off a buy point of 239.95 from a flat bottom right next to a deep cup bottom. Breakouts have struggled over the past year, but the 6% deep base reduces the risk somewhat. the relative force line is at its best level for nearly 10 years.
Deere stock edged down 0.2% to 436.15, still close to its 21-day line with the 10-week line catching up. DE stock traded tight after a strong run. It is on track to have a shallow flat base at the end of the week with a buy point of 448.50. A move above the December 21 high at 444.51 would offer early entry into Deere stock. The RS line for DE stocks is at an all time high.
ATI stock jumped 3.8% to 31.45, bouncing off the 10-week line and reaching a trendline entry. The official buy point is 31.84 from a handful. The RS line for ATI is at its highest level for three years.
Freeport-McMoRan stock rose just over 2% to 38.88, bouncing off the 21-day and 10-week lines. This offers early entry from a long and deep base with a handle with a buy point of 41.26. FCX stock is yet to be extended from its 50-day line, which just crossed 200 days
Schlumberger stock rose 1% to 53.50, working a buy point of 56.14 from a short base. SLB stock has crossed a trend line and is still close to its 21 and 50 day lines.
Market rally analysis
The stock market rally showed divided and divergent action in Tuesday’s session.
The Dow once again found support at its 50-day line, but hit resistance at its 21-day line.
The S&P 500 lost a bit more ground to a rising 50-day line.
The Invesco S&P 500 Equal Weight ETF (RER) edged higher, briefly topping its 50-day line, as the impact from Tesla, Nvidia, Moderna and Enphase was muted.
The Nasdaq slipped on Tuesday, closing in on Thursday’s intraday lows. The composite flirted with a closing low in the bear market.
In addition to industrial, metallurgical, mining and energy players such as Caterpillar, Schlumberger and FCX, many medical players are performing well. Housing inventories, from builders to materials to retailers, are also showing strength, as are some retailers. Chinese internets rebound as economy opens up.
But growth and tech stocks generally look terrible.
A pressured uptrend that is also a divergent market rally amid huge macro uncertainty is unstable and highly risky. And that’s before individual stock risk.
It’s possible that real-economy names will lift tech during a stock market rally in 2023, especially if the Federal Reserve and economic headwinds recede. Or tech and growth stocks could pull the broader market back to bearish lows. Or the major indices could tilt sideways with significant sector rotation for an extended period.
What to do now
The stock market rally is still suspended. Parts of the market are doing well as the uptrend shows increasing divergence.
An agile investor might try to buy, for example, CAT, ATI or Schlumberger stocks. But the exposure should be light and any new positions should be small. Investors could also play the sector or theme through ETFs such as XME, XLE, OIH or XLI.
There is nothing wrong with not taking new positions, or even being all in cash.
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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