Dow Jones futures edged higher overnight, along with S&P 500 futures and Nasdaq futures. The stock market rally had a slightly positive session on big-cap indexes Tuesday. But small-cap and midcap stocks had a big day.

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Two big Cathie Wood holdings, Shopify (SHOP) and Coinbase Global (COIN), went in opposite directions Tuesday.

SHOP stock rose solidly, extending Monday’s advance and flashing an early entry.  TransMedics Group (TMDX), Taiwan Semiconductor Manufacturing (TSM), Life Time Group (LTH) and Marriott International (MAR) made bullish moves.

Meanwhile, the SEC charged Coinbase with being an unlicensed broker and violating other securities rules. COIN stock tumbled 12%, though it did come off intraday lows. Coinbase stock fell just over 9% on Monday, below its 50-day and 200-day lines, after the SEC sued Binance, the world’s largest cryptocurrency exchange.

SHOP stock was added to IBD Leaderboard and SwingTrader on Tuesday. TMDX stock is on the IBD 50. Shopify also was Tuesday’s IBD Stock Of The Day.

Dow Jones Futures Today

Dow Jones futures edged up vs. fair value. S&P 500 futures and Nasdaq 100 futures rose about 0.1%.

The 10-year Treasury yield fell 3 basis points to 3.67%.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live

Stock Market Rally

The stock market rally showed strong market breadth even as the major indexes traded in a tight range.

The Dow Jones Industrial Average eked out a fractional gain in Tuesday’s stock market trading. The S&P 500 index rose 0.2%. The Nasdaq composite climbed 0.4%. The small-cap Russell 2000 jumped 2.7%.

U.S. crude oil prices fell 0.6% to $71.74 a barrel. The 10-year Treasury yield edged up 1 basis point to 3.7%.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.5% to a 2023 high. The iShares Expanded Tech-Software Sector ETF (IGV) edged up 0.2%. The VanEck Vectors Semiconductor ETF (SMH) climbed 0.7%. TSM stock is a major SMH component.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) gained 1.5% and ARK Genomics ETF (ARKG) popped 2.3%. As stated above, COIN stock and Shopify are major holdings for Ark Invest’s ETFs. Tesla (TSLA), Roku (ROKU) and DraftKings (DKNG) were other big components that had solid gains Tuesday.

SPDR S&P Metals & Mining ETF (XME) rose 2.4% and the Global X U.S. Infrastructure Development ETF (PAVE) 1.5%. U.S. Global Jets ETF (JETS) ascended 1.7%. SPDR S&P Homebuilders ETF (XHB) stepped up 2.9%. The Energy Select SPDR ETF (XLE) advanced 0.8% and the Health Care Select Sector SPDR Fund (XLV) retreated 0.8%.

The Financial Select SPDR ETF (XLF) climbed 1.3%. The SPDR S&P Regional Banking ETF (KRE) soared nearly 5%, hitting its best levels since late April.

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Stocks In Buy Zones

Shopify stock jumped 6.2% to 63.66, clearly breaking a trendline in a short consolidation. Volume was the heaviest since the huge three-day run following Q1 earnings. SHOP stock already was actionable Monday as it bounced from its 21-day line. It’s starting to look extended. It’s possible the e-commerce giant will forge a new base, but not until the end of next week.

TransMedics stock leapt 6.2% to 79.40, rebounding from the 50-day line in strong volume. TMDX stock has a 90.15 buy point, but is actionable here.

Taiwan Semiconductor stock climbed 1.8% to 99.82, moving back above the 98.99 consolidation buy point in above-average trade, according to MarketSmith analysis. The chip foundry giant sees stronger performance in the second half of 2023, and also guided capital spending to the low end of prior guidance. TSM stock gapped out of its base on May 25, following the blowout results and guidance from key customer Nvidia (NVDA), but soon pulled back. On Monday, shares retreated to just above their 21-day line before rebounding.

Life Time stock popped 4.2% to 20.94, reclaiming a 20.35 cup-base buy point in strong volume. Investors could view the past few weeks as a flat base with a 21.39 entry. LTH stock did get to an 18-month high of 21.75 intraday.

Marriott stock rose 2.1% to 180.90, offering an early entry in an emerging flat base next to a yearlong cup-with-handle base. The MAR stock flat base won’t be forged until Friday, but would have a 183.27 buy point. A move above the old buy point of 181.55 would be another entry and mark a 52-week closing high.

Market Rally Analysis

The stock market rally had a dull day according to the major indexes, but there was underlying strength.

The Nasdaq rose but isn’t getting significantly more extended. The S&P 500 continues to hold just below August 2022 highs. The Dow Jones pulled back to its 50-day line before reversing higher.

Meanwhile, the Russell 2000 and S&P 500 MidCap 400 both jumped to their best levels since March 9.

The Invesco S&P 500 Equal Weight ETF (RSP) rose 0.7%, hitting a one-month high after reclaiming the 50-day and 200-day lines last Friday.

The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) edged up 0.2%, right at 52-week highs.

Overall, winners beat losers by more than 3-to-1 on the NYSE and by 5-to-2 on the Nasdaq. The number of stocks hitting new highs easily beat those setting new lows.

The market rally has been led by a smaller number of tech titans and AI plays. Many of those names are pausing or at least not outpacing the field. That’s probably healthy for those stocks and the broader market. That could help keep the Nasdaq from getting overheated as, hopefully, more groups join leadership.

Homebuilders, building products, medical products and travel names are showing some strength.

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What To Do Now

With the major indexes holding steady, market breadth showing a positive, tentative trend and a small number of buying opportunities, investors could keep adding buys gradually. It’s an opportunity for lightly invested traders to bulk up exposure, while those who rode the AI wave can diversify their portfolio.

Shakeouts remain common, while many stocks with deep bases look extended at traditional buy points. So look for early entries, and try to buy stocks as close to buy points as possible. This is where building your watchlists and setting alerts pays off. If you’ve done your homework, the real tests are a lot easier.

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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