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Dow Jones Futures Rise After Tesla Breaks Out, Apple Watch Scores Big Win

Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures, after the stock market rally nudged higher Wednesday.




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Tesla (TSLA) cleared a new early entry amid reports that the EV giant will roll out an updated Model Y in China next year. Apple (AAPL) held a buy point, reversing fractionally higher after a big Apple Watch victory.

Meanwhile, MercadoLibre (MELI), Spotify (SPOT), DoorDash (DASH) and PDD stock are four leaders finding support at the 21-day moving average. A strong move off the 21-day line can provide add-on entries for existing investors as well as new positions for aggressive traders given the strong market rally.

Tesla stock is on IBD Leaderboard. PDD Holdings (PDD), DoorDash and MELI stock are on the IBD 50. Spotify was Wednesday’s IBD Stock Of The Day.

Dow Jones Futures Today

Dow Jones futures rose 0.1% vs. fair value. S&P 500 futures advanced 0.2% and Nasdaq 100 futures advanced 0.3%.

The 10-year Treasury yield edged up to 3.8%.

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 had a quiet session, with little intraday movement for the major indexes.

The Dow Jones Industrial Average rose 0.3% in Wednesday’s stock market trading. The S&P 500 index edged up 0.1% with Tesla stock a top performer. The Nasdaq composite climbed nearly 0.2%. The small-cap Russell 2000 advanced 0.3%.

The S&P 500 continues to move toward record highs, as the Santa Claus year-end rally continues.

But the market looks increasingly overbought, the Nasdaq is extended from the 50-day line while sentiment indicators point to elevated bullishness. All of that continues to suggest another market pause or pullback is likely. Investors waiting to sell stocks until January for tax reasons may be delaying that potential pullback, but ultimately that could make the eventual pullback more significant.

U.S. crude oil prices fell 1.9% to $74.11 a barrel.

The 10-year Treasury yield tumbled 10 basis points to 3.79%, a fresh five-month low. Markets are now pricing in a steady diet of Fed rate cuts next year, starting at the March meeting.

ETFs

Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) lost a fraction. The VanEck Vectors Semiconductor ETF (SMH) edged up 0.1%

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) climbed 0.9% and ARK Genomics ETF (ARKG) was just above break-even. Tesla stock is still a major holding across Ark Invest’s ETFs.

SPDR S&P Metals & Mining ETF (XME) rose 0.2%. U.S. Global Jets ETF (JETS) fell 0.3%. SPDR S&P Homebuilders ETF (XHB) advanced 0.3%. The Energy Select SPDR ETF (XLE) declined 0.4% while the Health Care Select Sector SPDR Fund (XLV) gained 0.4%.

The Industrial Select Sector SPDR Fund (XLI) added 0.15%. The Financial Select SPDR ETF (XLF) climbed 0.3%.


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Tesla Stock

Tesla stock rose 1.9% to 261.47, clearing a 259.84 early entry within a double-bottom base. The official buy point is 278.98. The relative strength line is still in a five-month slump, but has hit a two-month high.

On Tuesday night, Bloomberg reported that Tesla is gearing up to produce an updated Model Y, perhaps as early as mid-2024. The EV giant reportedly will shut down part of its Shanghai plant for a full week around the Lunar New Year to make some initial production line changes.

Tesla China denied the Bloomberg report in a statement to local media, but investors took the news to be largely true.

A Model Y refresh has been expected even before the recent Model 3 update launch in Shanghai. “Highland” Model 3 deliveries have started in China and Europe. Tesla’s Fremont plant is expected to start making the upgraded Model 3 in early 2024.

In early January, Tesla will release fourth-quarter and full-year delivery figures. Tesla needs just under 476,000 deliveries in Q4 to reach its full-year target of 1.8 million. Strong China registrations are leading the way.

Apple Stock

Apple stock fell as low as 191.09 on Wednesday, undercutting a 192.93 cup-with-handle buy point and clearly dropping below the 21-day line. But shares bounced back to close up 14 cents at 193.19. Investors could buy AAPL stock here or wait for a decisive move off the 21-day that breaks a short downtrend.

On Wednesday, an appeals court temporarily stayed a ban on importing the Apple Watch Series 9 and Ultra 2. That means that Apple, which halted sales of those Apple Watch models last week, will be able to sell them during a key period.

The International Trade Commission found in October that the Series 9 and Ulta 2 watches’ blood oxygen sensor infringed on Masimo (MASI) intellectual property. The ITC must respond to the appeals court by Jan. 10.

Stocks Near Buy Points

MercadoLibre stock edged up 0.9% to 1,590.88, bouncing off its 21-day line. Shares have been consolidating for a few weeks after a solid run from a Nov. 14 breakout from a cup-with-handle base, according to MarketSmith analysis. MELI stock could have a flat base by the end of next week. But a move above the 1,600 level, which would also push MercadoLibre above the 10-day line, would offer an early entry from the 21-day.

SPOT stock nudged 0.2% higher to 190.27 on Wednesday, holding near the 21-day line for the past several sessions. Shares have been consolidating for a few weeks after a strong run. A move above Wednesday’s high of 192.03 would offer an early entry. The 50-day line is starting to catch up, but still has some distance from Spotify stock.

DASH stock has been pausing for a few weeks after a strong run, recently finding support just above the 21-day line. Shares rose 0.9% to 100.72 on Wednesday. A 21-day line test would be constructive for DoorDash stock, which could be forging a three-weeks-tight pattern.

PDD stock dipped 0.5% to 144.45 on Wednesday. Last Friday, shares briefly touched the 21-day line as China stocks wobbled on tech crackdown fears. The parent of Pinduoduo and Temu hit a two-year high of 150.66 on Dec. 19, but arguably has been consolidating since the end of November. A longer pause would be healthy for PDD stock, and could offer an add-on entry from another 21-day test.

What To Do Now

The stock market rally keeps moving higher even as risks of a pullback mount. Investors shouldn’t be aggressive in the current environment, especially with early January tax selling a potential catalyst for a pullback. You may want to consider partial profits.

But for the most part, investors should be holding significant exposure into 2024, working on watchlists to track potential buys in the new year.

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

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

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