Dow Jones futures fell slightly late Wednesday, along with S&P 500 futures and Nasdaq futures, after a wild day for the stock market. Cisco earnings, the Ford F-150 Lightning and Bitcoin’s ongoing price swings were in focus overnight.
The major indexes tested key levels Wednesday morning while Bitcoin cratered, only for equities and cryptocurrencies to rebound well off lows. The S&P 500 and Dow Jones found support at their 50-day moving averages while the Nasdaq held above last week’s lows. Still, they all closed down for a third-straight session.
Federal Reserve policymakers gave the first official hints that they are thinking about talking about tapering bond purchases. That news lifted Treasury yields and the dollar, but didn’t appear to have a big impact on stocks.
Meanwhile, Bitcoin crashed to just over $30,000 Wednesday morning, rebounding sharply but still down significantly from Tuesday. Bitcoin tumbled over the past week after Tesla (TSLA) CEO Elon Musk turned on the biggest digital asset, but Musk offered some fresh support on Wednesday. Coinbase (COIN), which suffered an outage Wednesday morning, hit a fresh low. Microstrategy (MSTR), Grayscale Bitcoin Trust (GBTC) and other Bitcoin plays sold off before paring losses
Meanwhile, commodity-related stocks, including miners, metals, fertilizers all retreated, as crude oil, copper, lumber and other commodity prices fell. Airlines, which showed promise Tuesday morning, fell back Wednesday. Financials also struggled.
Cisco earnings topped fiscal Q3 views, but the Dow networking giant gave weak EPS guidance. CSCO stock tumbled overnight. Shares fell 0.75% to 52.47 on Wednesday, finding support above its 50-day line.
Synopsys earnings easily beat fiscal Q2 views. SNPS stock rose modestly in extended trade. Shares climbed 1% to 237.36 on Wednesday, holding their 200-day line and slightly below their 50-day avearge.
Star Bulk Carriers earnings are not yet out. Shares rose 2% to 22.54 on Wednesday, just below a recent six-year high. Star Bulk earnings followed strong results early Wednesday from Zim Integrated Shipping (ZIM), which jumped to a record high.
Ford F-150 Lightning
Meanwhile, Ford Motor is set to formally unveil its F-150 Lightning at 9:30 p.m. ET. President Joe Biden gave a test drive Tuesday of the EV version of the best-selling pickup. Investors will want to learn more about the F-150 Lightning’s specs, price and launch date.
The F-150 Lightning unveiling will come too late for extended trading, so investors won’t give their first review until Thursday morning. Ford stock dipped 0.3% to 12.10 on Wednesday, just below the 50-day line. F stock has a 13.72 buy point. Investors could use a move above Tuesday’s high of 12.53 as an early entry, above the 10-week line and a trend line.
Rivian will launch its electric pickup in June, with the GM Hummer EV set for late 2021. The Tesla Cybertruck likely won’t arrive until 2022. There’s still no finished design, the Austin plant is under construction and the new 4680 batteries are several months, at least, from mass production.
Bitcoin Price Has Wild Ride
Bitcoin plunged from $43,738 to a three-month low of $30,201.96. The Bitcoin price then rebounded above $40,000 before trading below $39,000 Wednesday evening. The huge fluctuations highlighted concerns with Bitcoin as a store of value.
Bitcoin peaked at $64,829.14 just over a month ago. Selling intensified over the past week as Elon Musk said late on May 12 that Tesla would no longer accept Bitcoin for vehicle purchases, citing environmental concerns. On Tuesday, China stepped up its crypto crackdown.
On Wednesday, Musk again suggested on Twitter that Tesla is still holding a substantial amount of Bitcoin. Ark Invest’s Cathie Wood, who has become a big crypto fan, reiterated her $500,000 target for Bitcoin, adding that the digital asset appeared to show capitulation selling on Wednesday. ARK Invest has a stake in GBTC stock and has amassed a sizeable position in COIN stock.
GBTC stock sank 5.2% to 32.60, rebounding from a low of 28 and a test of its 200-day line. Coinbase stock lost 5.9% to 224.80 after setting a fresh low of 208.
Tesla, which still owns a tidy amount of Bitcoin, fell 2.5%, undercutting its recent lows and setting a 2021 closing low. TSLA stock is starting to lose touch with its 200-day moving average.
Fed Taper Talk Soon?
Some Federal Reserve officials expressed support for discussing tapering asset purchases at future meetings if economic growth continues to expand rapidly. That’s according to Fed minutes from the April 28-29 Fed meeting.
Even if the Fed taper talk begins at the June meeting, an actual taper likely wouldn’t occur for several months after that. Actual Fed rate hikes from near zero are a long way off.
The major indexes, already well off morning lows, continued to pare losses in volatile fashion after the 2 p.m. Fed minutes release.
Normally, Fed hints at curbing aggressive monetary policy hurt stocks. But amid concerns that the Fed is falling behind the curve on rising inflation pressures, Wall Street may favor taper talk to some extent.
A less-aggressive Fed would be good news for the dollar and Treasury yields. But it’s bad news for gold and Bitcoin, both of which benefit as inflation hedges and dollar alternatives.
Dow Jones Futures Today
Dow Jones futures dipped 0.1% vs. fair value. S&P 500 futures edged down 0.1%. Nasdaq 100 futures fell 0.1%. Cisco stock is a drag on Dow futures but also the S&P 500 and Nasdaq.
Coronavirus cases worldwide reached 165.37 million. Covid-19 deaths topped 3.42 million.
Coronavirus cases in the U.S. have hit 33.79 million, with deaths above 601,000.
Stock Market Rally
The stock market rally could have been a lot worse, closing with slim-to-modest losses.
The Dow Jones Industrial Average sank 0.5% in Wednesday’s stock market trading. The S&P 500 index dipped 0.3%. The Nasdaq composite closed just below break-even. The small-cap Russell 2000 sank 0.8%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.5%, while the Innovator IBD Breakout Opportunities ETF (BOUT) lost 2.1%. The iShares Expanded Tech-Software Sector ETF (IGV) edged up 0.5%. The VanEck Vectors Semiconductor ETF (SMH) rebounded 1.8%.
SPDR S&P Metals & Mining ETF (XME) skidded 3.1% and Global X U.S. Infrastructure Development ETF (PAVE) fell 1.5%. U.S. Global Jets ETF (JETS) descended 1.1%. SPDR S&P Homebuilders ETF (XHB) declined 1.1%. The SPDR Energy Select Sector ETF (XLE) backed off 2.5%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) sank 1.8% and ARK Genomics ETF (ARKG) 1.7%. Both are below their 200-day moving averages. Tesla stock is the top holding across Ark Invest’s ETFs. COIN stock and GBTC also are ARK holdings.
Target stock shot up 6.5% to 219.82, hitting a record high. TGT stock rebounded from the 21-day and 10-week lines, offering an entry point. Target earnings shot up 525%, while revenue climbed 23%, both easily beating. The relative strength line for Target stock is at a record high, a bullish sign on a breakout. The RS line, the blue line in the charts provided, tracks a stock’s performance vs. the S&P 500 index.
Facebook stock fell intraday to its 10-week line, but rebounded to close 1.2% to 313.59, above its 21-day line. The 10-week line test offered an early entry. FB stock is just within range of a 299.81 handle buy point cleared in early April.
Google stock also tested its 10-week line, bounced to finish up 0.4% at 2,271.50. GOOGL stock could be bought off the 10-week line now. Investors might want to wait for the FANG giant to clear Tuesday’s high of 2,307.68, which would involve breaking a short downtrend and retaking the 21-day line. Google stock is just above the 5% chase zone from a 2,145.24 flat-base buy point, according to MarketSmith analysis.
Trip.com jumped 4% to 41.02, rebounding from its 50-day and 10-week lines. The China-based operator of several travel sites in China and the U.S. reported a smaller-than-expected quarter loss and revenue decline late Tuesday. TCOM stock is above a downward-sloping trend line, offering an aggressive entry. Another early entry is 41.60, above the April 29 short-term high. The official buy point is 45.29.
Maravai stock edged up 0.3% to 38.55 after hitting 37.12 intraday, finding support at the 21-day line. On Tuesday, MRVI stock shot up to 41, clearing a 39.95 handle buy point but the breakout fizzled. Still, the RS line is at a record high on a weekly chart. Investors could buy MRVI stock off the 10-week line. But this coronavirus vaccine supplier has big intraday price swings.
Market Rally Analysis
The stock market rally rebounded from sharp morning losses to key levels. The Dow Jones and S&P 500 found support at their 50-day lines, just above their May 12 lows, a day after falling below their 21-day averages. The Nasdaq tested last week’s short-term lows before slashing losses. The Nasdaq is still retreating from the 50-day line. So is the Russell 2000.
If the stock market rally can rebound from here, then Wednesday’s low will look like a bullish rebound from key support. But if selling resumes, Wednesday will look like just another down day on the chart. That’s what happened last week. On May 11, the Nasdaq led the major indexes off lows, only for the key averages to fall sharply on May 12.
Meanwhile, some leading stocks took hard hits, especially commodity plays. Airlines and banks also retreated Wednesday to various degrees, though financials bounced somewhat on the possibility of Fed taper talk.
Game Plan: Watch The Game
It’s simply a very difficult market to make money in. Breakouts fizzle or decent gains roundtrip, while bullish rebounds haven’t had a great track record. A choppy market rally will lure investors in near short-term tops, resulting in quick losses. A choppy market rally with a downside bias, like now, stacks the odds even higher against you.
Investors should have only a modest exposure to the current market rally. If you do make any new buys, such as Google or Target, make the positions small. Consider taking some profits or simply cutting losses to keep your exposure from increasing.
There’s nothing wrong with being entirely in cash. Cash has a rising relative strength line in recent weeks, especially compared to growth stocks. Make sure you preserve your financial and mental capital.
But whether you’re partially or entirely on the sidelines, you still want to watch the game. Market conditions can turn very quickly. So follow the major indexes and leading stocks closely and update your watchlists.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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