Futures Rise After Further Market Losses; This Stock Clears Buy Point

Dow Jones futures tilted higher overnight, along with S&P 500 futures and Nasdaq futures.

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The stock market rally suffered further losses, with the Nasdaq suffered a 1%+ decline for a second straight day, adding its losing streak to four sessions. Market losses broadened out considerably.

Eli Lilly (LLY) rose solidly, clearing a second early entry after flashing a buy signal Tuesday.

Bitcoin fell solidly Wednesday, with SEC approval of spot bitcoin ETFs expected within days. Notable crypto plays such as COIN stock, Marathon Digital (MARA) and MicroStrategy (MSTR) tumbled Wednesday morning, though Coinbase (COIN) and MARA stock rebounded well off lows.

Tesla (TSLA) was a notable loser, though the action could be constructive ultimately.

Cathie Wood’s Ark Invest bought Tesla shares Wednesday, while selling some COIN stock.

TSLA stock exited IBD Leaderboard on Wednesday. Eli Lilly stock is on SwingTrader.

Dow Jones Futures Today

Dow Jones futures were 0.1% above fair value. S&P 500 futures and Nasdaq 100 futures rose 0.1%.

The 10-year Treasury yield edged up to 3.93%.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

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Stock Market Rally

The stock market rally suffered further losses Wednesday.

The Dow Jones Industrial Average fell 0.8% in Wednesday’s stock market trading, along with the S&P 500 index. The Nasdaq composite slumped 1.2%.

Market breadth was weak Wednesday, after holding up relatively well Tuesday.

The small-cap Russell 2000 plunged 2.7%.

The Invesco S&P 500 Equal Weight ETF (RSP), which rose a fraction Tuesday, slumped 1.5% on Wednesday.

The Nasdaq closed below its 21-day moving average for the first time since Nov. 1, while the Russell 2000 also undercut that level. The S&P neared their 21-day line.

Many leading stocks saw further losses, though some are trying to find key support.

U.S. crude oil prices jumped 3.3% to $72.70 a barrel.

The 10-year Treasury yield fell 4 basis points to 3.905% after briefly hitting 4.01% in the morning.

Fed officials at the December meeting expected to cut rates in 2024, but the path is unclear, according to minutes released Wednesday afternoon. Earlier, the December ISM manufacturing index edged higher but still signaled contraction. Job openings fell in November but were slightly higher than expected.

The December jobs report will be in focus Friday morning.

ETFs

Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) fell 1.6%. The VanEck Vectors Semiconductor ETF (SMH) slid 1.8%.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) tumbled 3.9% and ARK Genomics ETF (ARKG) 4.6%.

SPDR S&P Metals & Mining ETF (XME) gave up 1.9%. U.S. Global Jets ETF (JETS) slumped 3.9%. SPDR S&P Homebuilders ETF (XHB) gave up 2.7%. The Energy Select SPDR ETF (XLE) rose 1.6%.

The Health Care Select Sector SPDR Fund (XLV) edged down 0.2%, with LLY stock a significant component.

The Industrial Select Sector SPDR Fund (XLI) gave up 1.5%.

The Financial Select SPDR ETF (XLF) shed 0.85%.

Tesla Fights For Support As Rival Races Ahead In EV Sales

Bitcoin Price

Bitcoin fell 4.7% to $42,952.22 as off 5 p.m. ET Wednesday, off intraday lows from a brief tumble undercutting $40,000. That’s after rising above $45,000 on Tuesday, the first time the cryptocurrency has topped that level since April 2022.

Bitcoin has surged over the past year, especially from the end of September, on hopes the SEC will approve spot Bitcoin ETFs, opening the door to wider institutional participation. That’s expected within the several days.

The SEC could approve spot bitcoin ETF issues on Friday, with trading starting next week, Fox Business reported Wednesday afternoon.

Bitcoin investor MicroStrategy sank 7.7% to 632.29. On Tuesday, MSTR stock hit 727.77, a two-year high.

Bitcoin miner Marathon Digital fell as low as 20.39, undercutting its 21-day line, before rebounding for a 2.4% gain to 23.48. MARA stock had plunged after hitting a 20-month high of 30.30 on Dec. 27.

Cryptocurrency exchange Coinbase declined 2.8% to 152.45, but well off intraday lows of 144.11. COIN stock hit a 20-month high of 187.39 on Dec. 28.

Cathie Wood Buys Tesla, Sells COIN

On Jan. 3, Cathie Wood’s Ark Invest bought 105,201 Tesla shares, which would be worth $25.09 million based on TSLA stock’s closing price. The flagship Ark Innovation ETF (ARKK) bought 91,194 Tesla shares while ARK Next Generation Internet ETF (ARKW) added 14,007 shares.

Meanwhile, ARKK sold 145,048 Coinbase shares, while ARKW sold 21,135, for a total of 166,135 shares. That’s equal to $25.29 million based on COIN stock’s Wednesday’s close.

The ARK Autonomous Technology & Robotics ETF (ARKQ) bought 27,324 shares of Rocket Lab USA (RKLB), worth roughly $140,000.

Cathie Wood often buys stocks that are selling off, while paring holdings of stocks on the upswing. Ark last bought Tesla stock on Dec. 20, which was the first time in eight months.

COIN stock is the No. 1 holding across Ark Invest’s ETFs. Tesla stock is still a major component in Cathie Wood’s Ark.

Eli Lilly Stock

LLY stock rose 4.3% to 617.70 in above-average volume, moving decisively above key resistance around 600, offering an entry for investors. On Tuesday, shares climbed 1.6%, moving back above the 50-day line and a downward-sloping trendline. That also was a buying opportunity. Eli Lilly stock has an official flat-base buy point of 629.97.

Tesla Stock

TSLA stock slumped 4% to 238.45 on Wednesday, falling below its 21-day line but finding support at the 10-week line. Analysts weren’t wowed by Tesla’s record deliveries, released Tuesday morning. The relative strength line isn’t far from October lows.

Tesla stock needs to find support, but if it does the recent action could be constructive. The EV giant ended 2023 with a tiny handle on a weekly chart with a 265.13 buy point. Now that handle, valid on a daily chart after Thursday, is 11% deep. That’s offering a more-meaningful shakeout.

The next big catalyst will be Tesla earnings for the fourth quarter, due on Jan. 24.

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What To Do Now

In hindsight, investors will be able to look back at charts and declare that it was “obvious” that the Nasdaq and leading stocks were going to knife below key support — or rebound from those levels.

But it’s not obvious, especially for individual stocks. Tesla stock, along with Microsoft (MSFT), ServiceNow (NOW), Netflix (NFLX) and others, may rally bullishly from their 10-week lines in the coming days. But some or all may break lower instead.

The Nasdaq may be about to level off and soon rebound, or perhaps it’ll fall back to the top of its prior range and test its 50-day line.

Right now, it’s a time to waiting to see how the market shakes out. A lot of setups are taking place, so keep your watchlists up to date.

Investors can choose to add exposure if leading names flash buy signals, but do so gradually, especially in the current environment.

It’s still not a bad idea to take some profits, especially if you didn’t do so in the past several sessions.

Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

Please follow Ed Carson on Threads at @edcarson1971, X/Twitter at @IBD_ECarson and Bluesky at @edcarson.bsky.social for stock market updates and more.

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