Dow Jones futures fell overnight, along with S&P 500 futures and Nasdaq futures. The ailing stock market tried to bounce Wednesday, but then sold off hard, as Russia-Ukraine tensions remained in focus. The Dow Jones, S&P 500 and Nasdaq composite undercut their Jan. 24 lows.
Russian troops continue to mass around Ukraine in combat-ready positions, with several indications of heavy activity near the border overnight. “They’re ready to go,” a senior Defense Department official said Wednesday. Ukraine President Volodymyr Zelensky said 200,000 Russian troops are on the border as he made a televised address to his besieged country.
The US signaled that it’s gearing up to impose technology export bans on Russia, among other penalties, if there’s a “further invasion” of Ukraine.
Tesla (TSLA) was the S&P 500’s worst performer on Wednesday, tumbling below 2022 lows after failing to reclaim key support. Recent investors should already be out, but even long-term TSLA stock holders should consider scaling out.
After the close, Booking Holdings (BKNG), Live Nation (LYV), NetApp (NTAP), Ultra Clean Holdings (UCTT) and eBay (EBAY) reported earnings.
Alibaba (BABA) and LNG play Cheniere Energy (LNG) are due early Thursday.
Tesla stock is on IBD Leaderboard.
Dow Jones Futures Today
Dow Jones futures fell 0.6% vs. fair value. S&P 500 futures retreated 0.6% and Nasdaq 100 futures sank 0.7%.
The 10-year Treasury yield fell 1 basis points to 1.97%. Crude oil prices rose 1%.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
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Stock Market Wednesday
The stock market opened higher, sold off and bounced back to break-even before tumbling again to close at session lows. The Dow Jones Industrial Average fell 1.4% in Wednesday’s stock market trading. The S&P 500 index retreated 1.8%. The Nasdaq composite tumbled 2.6%. The small-cap Russell 2000 lost 1.9%.
The 10-year Treasury yield rose 3 basis points to 1.98%. Crude oil futures rose 0.2% to $ 92.10 a barrel in an up-and-down session.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 2.5%, while Innovator IBD Breakout Opportunities (BOUT) dipped 0.4%. The iShares Expanded Tech-Software Sector ETF (IGV) retreated 2.5%. VanEck Vectors Semiconductor (SMH) skidded 2.1%.
SPDR S&P Metals & Mining (XME) rose 1.3%, and the Global X US Infrastructure Development ETF (PAVE) gave up 2.3%. US Global Jets (JETS) descended 3.2%. SPDR S&P Homebuilders (XHB) was off 2.7%. The Energy Select SPDR ETF (XLE) climbed 1%, and the Financial Select SPDR ETF (XLF) pulled back 1.7%. The Health Care Select Sector SPDR Fund (XLV) edged down 0.5%.
Reflecting stocks with more speculative stories, the ARK Innovation ETF (ARKK) tumbled nearly 4% and ARK Genomics (ARKG) slumped 3.5%, both to fresh 20-month lows. Tesla stock remains the No. 1 holding across Ark Invest ETFs.
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BKNG stock fell modestly in overnight trade after initially rising as Booking earnings crushed views and revenue topped. Shares fell 1.9% to 2,469.83 on Wednesday. BKNG stock cleared a 2,687.39 buy point on Feb. 16, but since then has pulled back sharply with other travel plays and the broader market.
LYV stock, another reopening play, jumped into extended action on strong earnings. Live Nation stock fell 3.1% to 113.44 on Wednesday. The official buy point is 127.85. Investors could use 121.43, which will soon be a handle, as an early entry.
NTAP stock sold off overnight as data storage giant NetApp topped earnings views while revenue was in line. NetApp stock is in a flat base but is below its 50-day and 200-day lines.
UCTT stock rose slightly in extended trade as the chip equipment maker narrowly beat quarterly views. Ultra Clean stock is far from highs, below its 50-day and 200-day lines.
EBAY stock plunged late on weak guidance and in-line revenue, despite better-than-expected earnings.
BABA stock is in a long downtrend and near multiyear lows, but Alibaba earnings early Thursday will still provide insight into Chinese e-commerce and overall economic growth.
LNG stock rose 2.8% to 119 on Wednesday, just on the edge of a buy range. Sky-high European energy prices and the Russia-Ukraine crisis are spurring demand for US liquefied natural gas shipments.
Tesla Vs. BYD: Which Booming EV Giant Is The Better Buy?
After closing below its 200-day line on Tuesday, Tesla stock briefly reclaimed that key level before reversing lower. TSLA stock plunged 7% to 764.04, undercutting its Jan. 28 low of 792.01 to hit a five-month low.
The relative strength line for Tesla stock has fallen to the lowest level since October. The RS line, the blue line in the charts provided, tracks a stock’s performance vs. the S&P 500 index.
Tesla delivered great Q4 numbers and should have a strong 2022 as production continues to ramp up even as chip woes still limit overall auto industry output. The lack of new Tesla models in 2022, after CEO Elon Musk had promised a “product roadmap,” has disappointed investors.
But the bigger issue is the weak market environment. That’s particularly true of growth stocks, with highly valued names like Tesla stock hit especially hard.
Anyone who bought Tesla breaking out of the big cup base, with a 900.50 buy point, should have sold long ago. If you bought at various buy points in the 700s, it’s past time to be out and locking in remaining profits. Do not let huge gains round-trip and turn into a loss.
But what about investors who bought Tesla stock long ago and are sitting on huge winnings? Your patience and conviction have paid off big time in the past two years. It’s certainly possible that TSLA stock will soon rebound and make another leg higher.
But at some point, huge winners like Tesla stock end their run and break down. So investors need to have an exit strategy. Your exit points will vary based on the size of your position and percentage gains, your general risk tolerance and your conviction in the stock.
TSLA stock is now 8% below its 200-day line. A decisive break here would leave no obvious support level until the 2021 lows of around 540-550. If shares can not rebound by the end of the week, long-term investors may want to consider reducing their TSLA stock holdings. The risks only grow as the broader market starts to break to new lows.
When It’s Time To Sell Your Favorite Stock
The stock market tried to bounce Wednesday morning, but that quickly fizzled as Russia invasion fears again came to the fore. The Nasdaq composite, up more than 1% soon after the open, quickly reversed, ultimately tumbling to below its Jan. 24 low. The S&P 500 and Dow Jones also undercut their Jan. 24 lows.
Ever since the S&P 500 and Nasdaq closed below the low of their Jan. 31 follow-through days, the market rally outlook was bleak. Since then, the major indexes continued to rack up more distribution days of high-volume selling.
The S&P 500 is down more than 10% from its highs, marking an intermediate correction by traditional standards. The Nasdaq is on the cusp of a bear market, down 19.6% from its Nov. 22 high.
It would not be surprising to see the market rebound after so many down sessions. But even a few good days would not necessarily signal a clear revival. On the flip side, the major indexes could be on the verge of another leg down. A further Russian invasion of Ukraine, or merely war fears, could trigger a new wave of selling.
Few stocks are setting up right now. That’s especially true in growth.
The travel sector, despite some positive tailwinds, has faded over the past few sessions, including BKNG stock. Even energy and commodity groups that are holding up are volatile and aren’t that enticing for new buys.
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What To Do Now
What more needs to be said? The stock market looks terrible, with the major indexes breaking below late-January lows after several warning signs. Every day, the reasons to stay invested dwindle. The only exceptions are pockets of market strength or long-term winners. But even with long-term winners such as Tesla stock, investors have to scale out or cash out at some point.
Don’t get sucked into a morning bounce, like Wednesday’s, or even a couple of good days. Wait for convincing signs of market strength. That includes leading stocks setting up and flashing buy signals.
For now, keep your exposure minimal or be entirely in cash. Stay engaged and prepared by watching the market action and reworking 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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