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Dow Jones futures fell slightly on Tuesday night, as did S&P 500 and Nasdaq futures, with Square (SQ) headlining key benefits and You’re here (TSLA) among several EV plays active at night.
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It was a crazy day for the stock rally, at least for the Nasdaq and in particular for speculative growth names like Tesla Stock and rival China EV. Nio (NIO). The Nasdaq fell more than 3% intraday, but rallied for a modest loss. The price of Bitcoin plunged for a second consecutive session.
Square profits have exceeded views, aided by its Bitcoin operations. But net income and buying volume missed estimates. Recent IPOs Upwork (UPWK) and PubMatic (PUBM) has also exceeded views.
The square stock fell 5% late. SQ stock fell 4.3% on Tuesday after rebounding from its 50-day line. Upwork stock shot up 18% and PubMatic surged 10% overnight after both rallied sharply on Tuesday from key intraday levels. UPWK rebounded from its 50 day line to finish slightly higher. PUBM closed for modest losses, but after plunging below a buy point, making it very difficult to hold.
These stocks show strength, pass buy points amid market turbulence
The Nasdaq looked like it was flashing an intraday vertical violation as it tumbled rapidly down its 50-day line. But the strong rebound in modest losses leaves market direction uncertain. The Dow Jones and S&P 500 erased relatively modest losses to close just above the breakeven point. The stock market rebound could simply be in a sector rotation, with higher yields and commodity prices leading to a shift towards mining, agricultural and financial stocks.
Dow Jones Components caterpillar (CAT), Disney (DIS) and JPMorgan Chase (JPM) advanced, all extended from recent eruptions. Microsoft (MSFT) edged lower but rebounded from its 10 week line and closed above its buy point of 232.96.
Bitcoin’s price fell below $ 45,000 intraday on Tuesday after surpassing $ 58,000 on Sunday. The cryptocurrency recovered above $ 48,000 overnight. Bitcoin is way above what it was before the market opened on February 8, when Tesla revealed that it had purchased $ 1.5 billion worth of cryptocurrency.
Tesla rebounds, work animal crashes
Tesla stock fell 2% to 698.84 on Tuesday, but after dropping as low as 619. Shares are still down almost 11% so far this week and 11% below its line 10 weeks. TSLA stock rose slightly overnight as Cathie Wood of ARK Invest said ARK bought “a lot” on Tuesday. This follows a big purchase by Ark of Tesla stock on Monday and Wood spoke about the company last week.
Tesla is ARK’s largest stake in its ETFs and, in many ways, is a marker of the type of speculative growth games that Cathie Wood focuses on.
The Nio stock fell 3.1% to 49.11 after skidding as low as 41.66. Shares fell 7.8% on Monday, crossing its 50-day line. The Nio stock rose slightly overnight. Nio’s income is due March 1.
But some of VE’s actions have been much worse. EV delivery van manufacturer Workhorse Group (WKHS) lost a major USPS vehicle contract for Oshkosh Corp. (OSH) The WKHS stock cratered 47%, then continued to drop sharply overnight. Oshkosh stock rose 6.1% on Tuesday, then surged in extended trading.
Churchill Capital (CCIV) fell 38%. Electric luxury start-up Lucid Motors confirmed it would go public as part of a SPAC merger with Churchill Capital on Monday evening. CCIV’s stock had skyrocketed 468% since Jan.8, as rumors of Lucid SPAC increased. Churchill Capital grew modestly overnight.
Tesla stock is on the IBD rankings, but went from a half position to a quarter position on Tuesday. Microsoft stocks are in the IBD ranking and long term leaders. Disney and Caterpillar shares are on SwingTrader.
Dow Jones Futures today
Futures contracts on Dow Jones fell 0.15% from fair value. S&P 500 futures fell 0.25% and Nasdaq 100 futures fell 0.35%.
Keep in mind that overnight action on Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular trading session.
Join the IBD experts as they analyze the exploitable stocks during the stock market rally on IBD Live.
Coronavirus news
Coronavirus cases around the world have reached 112.62 million. Covid-19 deaths have exceeded 2.49 million.
Coronavirus cases in the United States have reached 28.89 million, with deaths exceeding 514,000.
Stock exchange rally Tuesday
The stock rally began on Tuesday with the Nasdaq leading large losses. But major clues cut losses when Fed chief Jerome Powell spoke. Powell said there is a link between Fed liquidity and asset prices. But he reaffirmed once again his commitment to the current aggressive monetary policy and stressed that strong job growth is a primary objective. Powell also said the Fed was looking closely at whether to issue a “digital dollar,” but not major technical and political issues.
The Dow Jones industrial average was a fraction higher in Tuesday’s stock trading, just below record highs. The S&P 500 Index edged up 0.1%. The Nasdaq composite fell 0.5%.
Microsoft stock fell to as low as 228.73 intraday, testing the 10-week line, but not with wild drops like many stocks on Tuesday, including Square. Stocks never undermined early entries around 227-228. At the close, MSFT stock recovered a loss of 0.5% to 233.27, above the official buy point of 232.96.
Growth stocks generally lost ground, even with big bounces in the afternoon.
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) fell 2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 2.1%. The iShares Expanded Tech-Software Sector (IGV) ETF fell 1.1%, with MSFT stock being the main component. The VanEck Vectors Semiconductor ETF (SMH) slipped 1%.
Reflecting more speculative stocks, Ark Innovative ETF fell 3.3% and Ark Genomics ETF fell 3.05%.
Stock market analysis
The Nasdaq fell intraday just above the Jan 29 low and the 13,000 level then rose and fell before nearly breaking even.
We will have to see how the market reacts in the coming days to put Tuesday’s action into perspective.
Maybe Tuesday marks the start of a rally for the Nasdaq and big winners like Tesla and Nio stock. But sometimes a stock rally will find support and then break it. That’s what happened during the early September close, where the Nasdaq cut losses on the second day of a pullback before plunging on the third day to close below its 50-day line.
While the Dow Jones resists growth in real economy stocks, it looks in many ways like a strong sector rotation in a market rally.
For now, this remains a confirmed stock market rally. It’s a good day to read The Big Picture to stay in sync with market direction and major stocks and sectors.
What to do now
Investors need to be somewhat defensive, especially when it comes to high value growth stocks. The Nasdaq has shown a downtrend in recent sessions. Meanwhile, many growth stocks damaged the charts after the past two days. Even before the recent pullback, there were plenty of good buying opportunities.
One of the reasons for taking partial profits when the Nasdaq was extended in late January to early February is to make pullbacks more manageable. Selling extended stocks in strength can help you maintain a core position through rollbacks. If you sold some of the winners at Tuesday’s low, those first partial profits at least raised the average sale price.
Don’t let a stock drop more than 7% to 8% of your purchase price. Yes, if you were to sell Tuesday’s low you might regret it, at least for now, but it’s about preserving your capital, not hoping for a recovery.
In the meantime, be sure to keep working on watchlists. The last few sessions have shown the value of leadership diversification. Holding a few names like Disney would have made the last few days less painful.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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