Dow Jones futures were flat overnight, along with S&P 500 futures and Nasdaq futures. The stock market rally retreated Wednesday, closing at session lows. Crude oil prices jumped, and Treasury yields pulled back from 34-month highs.
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Apple stock and Tesla (TSLA) extended their winning streaks to seven sessions, though both came off intraday highs. Apple (AAPL) is in range from a trendline entry and not far from an official buy point. Tesla stock is a long way from its buy point. Both could use a pause, especially Tesla, to make their chart patterns more enticing.
Meanwhile, J.B. Hunt Transport Services (JBHT) and Costco Wholesale (COST) are pulling back within their buy zones, while CVS Health (CVS) and Builders FirstSource (BLDR) are working on possible handles.
Tesla and JBHT stock are on IBD Leaderboard, while COST stock is on the Leaderboard watchlist. J.B. Hunt, Costco and CVS stock are on SwingTrader. TSLA, J.B. Hunt and BLDR stock are on the IBD 50.
Dow Jones Futures Today
Dow Jones futures edged lower vs. fair value. S&P 500 futures were roughly unchanged. Nasdaq 100 futures rose 0.1%.
Crude oil prices rose 1%.
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 its biggest loss since March 14. The Dow Jones Industrial Average fell 1.3% in Wednesday’s stock market trading. The S&P 500 index lost 1.2%. The Nasdaq composite slid 1.3%. The small-cap Russell 2000 slumped 1.8%.
U.S. crude oil prices jumped 5.2% to $114.93 a barrel.
The 10-year Treasury yield retreated 5 basis points to 2.32% after hitting its highest levels since May 2019.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.3%, while the Innovator IBD Breakout Opportunities ETF (BOUT) closed just above break-even. The iShares Expanded Tech-Software Sector ETF (IGV) and VanEck Vectors Semiconductor ETF (SMH) both skidded 2.5%.
SPDR S&P Metals & Mining ETF (XME) rose 1.8% while the Global X U.S. Infrastructure Development ETF (PAVE) sank 0.9%. U.S. Global Jets ETF (JETS) descended 1.4%. SPDR S&P Homebuilders ETF (XHB) tumbled 3.9%. The Energy Select SPDR ETF (XLE) climbed 1.7% and the Financial Select SPDR ETF (XLF) gave up 1.85%. The Health Care Select Sector SPDR Fund (XLV) lost 1.8%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) fell 1.9% and ARK Genomics ETF (ARKG) sank 2.4%, after both flirted with their 50-day lines intraday. Tesla stock remains the No. 1 holding across Ark Invest’s ETFs.
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Apple Stock
Apple stock rose 0.8% to 170.21 on Wednesday, though off the intraday high of 172.64. After Tuesday’s close right on a trendline, shares are now above that early entry while still close to the 50-day line. It’s not far from a 176.75 double-bottom base buy point, according to MarketSmith analysis.
The relative strength line, the blue line in the charts provided, is back near record highs, reflecting Apple stock’s strong performance vs. the S&P 500 index.
Investors could buy AAPL stock right here. But after rising seven straight sessions, the iPhone giant could use a break. Ideally, Apple stock would pause here, at least for a few days, and then move higher. Of course, it doesn’t have to take a break anytime soon.
JPMorgan analyst Samik Chatterjee said iPhone sales are “robust” while Apple is set up for a “monster growth cycle” over the next 18 months.
Tesla Stock
Tesla stock ran up Wednesday morning to as high as 1,040.70. Shares pulled back, briefly turning negative, before eking out a 0.5% gain at 999.11. After running up for six sessions, including Tuesday’s 7.9% spike, the EV giant is now well extended from its 50-day and 200-day lines. But TSLA stock is still well below the cup-base buy point of 1,208.10, as well as a trendline entry around 1,150.
Ideally, Tesla stock would pause around current levels, forming a handle and a new, lower official buy point.
JBHT Stock
J.B. Hunt stock fell 1.7% to 210.18, its fifth straight decline but still holding above the 208.97 flat-base buy point. J.B. Hunt shot up 9.6% on March 16 in huge volume as the trucking firm forged an alliance with BNSF Railway, owned by Warren Buffett’s Berkshire Hathaway (BRKB). The glacial pullback toward the buy point offers a chance to start or add to a position, either now or after JBHT stock rebounds somewhat.
COST Stock
Costco stock dipped 1% to 554.02, still holding above a 545.39 buy point from a cup-with-handle base. The RS line for COST stock is holding right around record highs.
BLDR Stock
Builders FirstSource stock slumped 3.7% to 73.49, still above its 50-day line. BLDR stock has an 86.58 cup-base buy point, but could be working on a handle, which would create a lower entry.
One concern for Builders FirstSource is that many housing-related plays, including homebuilders and retailers are selling off as interest rates rise and new-home sales pull back.
CVS Stock
CVS stock retreated 1% to 106.20. That’s still close to a 111.35 flat-base buy point. It’s also around an early entry from around the 50-day line and the March 7 short-term high. Monday’s intraday high of 109.69 also could serve as another early entry.
Market Rally Analysis
The stock market rally suffered solid losses Wednesday, even with Apple masking the weakness in the big-cap indexes. The S&P 500 retreated below its 200-day line. The Dow Jones undercut its 50-day line.
The Nasdaq composite and Russell 2000 remain above their 50-day lines.
While down days aren’t fun, a brief market rally pause could be beneficial. That would let stocks such as Apple and Tesla take a breather, perhaps form handles. Meanwhile, stocks that continued to climb would see their RS lines rise significantly.
Energy stocks were leaders Wednesday, reflecting strong crude oil prices. Steel, mining and fertilizer plays also did well.
Software and housing-related stocks were losers. Medical stocks, from biotechs to health insurers, had a tough session.
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What To Do Now
Wednesday’s retreat wasn’t alarming given the strong recent gains for the market rally. But this is why investors should gradually build up exposure, to avoid jumping in right at a top, short term or otherwise. It’s also why you never want to buy an extended stock.
If the stock market rally struggles significantly, with the Nasdaq and S&P 500 breaking decisively below their 50-day moving averages, investors should probably trim or exit some recent positions.
This is a time to be flexible. Don’t get locked into a bullish or bearish mindset. Listen to the market, and act on that.
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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