Stock Market Rally Attempt Begins; Tesla Jumps Between EV Loan Guidelines

Dow Jones futures, along with S&P 500 futures and Nasdaq futures, were lower after hours heading into the last trading day of 2022. Major indices Thursday’s business data, Apple (AAPL) iPhone news and Tesla ( TSLA ) continues to bounce.


But the market is correcting after breaking the key levels on Wednesday. Thursday was just one day of a new stock market rally attempt. Investors should be very cautious when taking new positions.

Medpace (MEDP) gave a buy signal on Thursday KLA Corp. (KLAC), Starbucks (SBUX), United Leases (URI), Mobile (MBLY), Super Micro Computer (SMCI) and Fluorine (FLR) is established. But these stocks will rise or fall with the market.

MEDP stocks, Fluor and United Rentals are on the IBD Leaderboard. KLAC stock is in the IBD Long-Term Leaders. MBLY shares are in the IBD 50. KLA Corp. and URI stock is in the IBD Big Cap 20.

Meanwhile, new guidance from the Treasury Department says many Model Y vehicles won’t qualify for U.S. tax credits starting Jan. 1 without steep price cuts. But there’s a loophole that allows all Tesla cars — and any EVs — to get huge tax credits at any price.

Dow Jones Futures today

Dow Jones futures were down 0.1% at fair value. S&P 500 futures fell 0.2%. Nasdaq 100 futures fell 0.1%.

Remember that an overnight move in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.

Join IBD’s experts as they analyze the stocks that made the most of the stock rally on IBD Live

Sunday rally attempt

The stock market experienced a strong rally, rising in the morning and holding on to those gains in the afternoon.

The Dow Jones Industrial Average rose a little more than 1% in Thursday’s trading. The S&P 500 index rose 1.75%. The Nasdaq composite and the small-cap Russell 2000 rose 2.6%.

Initial jobless claims rose slightly more than expected in the week ended Dec. 24, but remained low at 225,000. Pending claims rose by 41,000 in the last week to 1.71 million, the highest since early February.

AAPL shares rose 2.8% to 129.61 on Wednesday after hitting a bear market low of 3.1%. According to The Wall Street Journal, Apple iPhone production is on the rise again following yet another report of recent iPhone production problems.

The price of crude oil in the United States decreased by 0.7% to 78.40 dollars/barrel.

The 10-year Treasury yield fell 5 basis points to 3.83%.


Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) rose 1.1% and the Innovator IBD Breakout Opportunities ETF ( BOUT ) gained 0.9%. The iShares Expanded Tech-Software Sector ETF ( IGV ) fell 3%. VanEck Vectors Semiconductor ETF (SMH) rose 3.3%. Reflecting more speculative story stocks, the ARK Innovation ETF ( ARKK ) jumped 5.2% and the ARK Genomics ETF ( ARKG ) jumped 4.1%. Tesla stock is a major holding in Ark Invest’s ETFs.

The SPDR S&P Metals & Mining ETF ( XME ) advanced 1.9%. The US Global Jets ETF (JETS) rose 2.65%. The SPDR S&P Homebuilders ETF ( XHB ) rose 2.4%. The Energy Select SPDR ETF ( XLE ) gained just over 1%, while the Financial Select SPDR ETF ( XLF ) rose 1.4%. The Healthcare Select Sector SPDR Fund ( XLV ) rose 1.1%.

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Tesla shares

Tesla shares rose 8.1% to 121.82 after jumping 3.3% on Wednesday. TSLA shares are still down a bit on the week, down 37% in December. After such a big selloff, Tesla stock should have retreated, but it remains well below key levels.

Tesla Model Y Tax Credits

Tesla’s bullish claim for 2023 is based on up to $7,500 in new U.S. tax credits under the Inflation Reduction Act, which should boost high-margin domestic sales by offsetting weak demand and prices in China and possibly Europe.

On Thursday, the Treasury Department listed the vehicles eligible for US home loans. Most versions of the Model Y will have a $55,000 price limit to qualify for EV loans, and $80,000 for SUVs, pickups and vans.

But seven-seat Model Ys, which aren’t big sellers, will qualify for up to $80,000.

In the U.S., with the current base Model Y starting at $65,990, Tesla will have to lower the price by reintroducing the lower-spec Model Y SR+ to get the tax credits, unless there’s a seven-seat option.

But there is another twist! The Treasury also said EVs leased by consumers could be eligible for commercial EV tax credits. This makes it compatible with electric vehicles assembled outside of North America, including the Hyundai Ioniq 5 and Kia EV6. Foreign automakers and US allies in Europe and Asia strongly objected to the North American assembly requirement. But leasing rules allow any EV to qualify for any price with no income restrictions.

It will be interesting to see what Tesla and other automakers do with options and pricing to get the most out of the new tax credits.

But investors seemed happy with the overall picture.

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Stocks Close to Buy Points

Shares of Medpace broke a bearish trendline as they rose 3.4% to 215.62, bouncing back from their 21-day and 50-day lines. MEDP stock rallied nicely, forming a deep 16% consolidation near the top of a long, deep base. The official buy point is 235, but Thursday offered early access.

KLAC shares rose 3.3% to 379.86, retreating from its 10-week line. A move above the 21-day line may give KLAC stock a chance to buy as a Long-Term Leader.

Shares of SBUX rose 1.2% to 99.77, bouncing back from its 10-week low and breaking above its 21-day high. This could be early access to a base that isn’t too short. This, in turn, could be seen as support for a 17-month deep consolidation for Starbucks stock.

URI shares rose 1.2% to 356.21, breaking above the 21-day line. United Rentals is near a 368.04 handle buy point at a 13-month consolidation, briefly overlapped earlier this month. URI stock traded very solidly during its run. The relative strength line is at a new high, reflecting the outperformance of United Rentals stock relative to the S&P 500 index.

Shares of MBLY rebounded from the intraday lows of its 21-day moving average, rising 2.8% to 34.51. Mobileye IPO went public in late October with 21 shares. MBLY stock has shown strength in a weak market, but like many new IPOs, it has made big whipsaw moves. The shares are starting to calm down. An aggressive investor might look for a trendline break for entry, but ideally, Mobileye stock will make a new base.

Shares of FLR rose 0.8% to 34.95 in continued tight trade, working on a possible flat base, which would be a base-based pattern. Fluoride revenues are expected to increase by 80% in 2023 as infrastructure stocks show strength in public and private projects.

Shares of SMCI rose 1.6% to 81.91, bouncing back from the 50-day line but finding resistance on the 21st. Clearing Wednesday’s high of 84.35, a strong 21-day move could suggest an early entry. Shares of Super Micro Computer, one of the strongest growth stocks of 2022, have been consolidating for several weeks after a November 2 earnings cliff, advancing to 95.22 on Nov. 25. SMCI shares may have a new base. end of next week.

Market analysis

After Wednesday’s sell-off, the stock market had a solid rally. After the intraday decline on December 13, the major indices were certainly “timed” for a bounce.

The question is whether they will follow through in the coming days and weeks.

The market went into correction on Wednesday as the Dow Jones broke below its 50-day moving average and the Nasdaq hit a two-year closing low.

So Thursday was just one of the new market rally attempts. It will take a lot to feel more confident.

The Dow Jones is back above its 50-day line, but still below its 21-day line.

The S&P 500 is still below its 50-day line with additional resistance at its 200-day line and the December peak.

While Tesla shares, Apple and many beaten-down chip and software names led Thursday’s jump, some leading stocks issued buy signals or moved into positions, such as MEDP stock.

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What to do now

It’s tempting to get back into the market when the indexes are up sharply and there’s a sea of ​​green among the leading and noteworthy stocks.

But since the October 13 bear market bottom, breakouts and buy signals have largely been exhausted.

Some sectors, including industrials, metals and medicals, have held up better in recent weeks, so it’s easier to justify nibbling on these areas with either specific stocks or sector ETFs. But keep any risk small and be quick to take profits and cut losses.

Bottom line: This is a market correction. Do not operate according to bull market rules, especially the 2020 crazy bull rules.

Invest like you’re driving on an icy, windy road, not the open highway. Proceed carefully or wait on the side of the road.

More time to plan your trip. Work on watch lists. A number of stocks from various sectors are showing strength.

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

Follow Ed Carson on Twitter @IBD_ECarson for stock updates and more.


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