Small Caps Recovering - Market Analysis for Aug 10th, 2007

Purely from a technical perspective, the iShares Russell 2000 ETF (AMEX: IWM) currently is in the midst of a recovery rally effort in the aftermath of the downleg from 85.74 to 73.95 (14%). The initial upmove of the recovery started at Monday's low of 76.43, and hit its initial high yesterday at 85.74. It is very interesting that the plunge from yesterday's recovery high pressed the SPY to retest Monday's low, pressed the Q's and the DIA to new reaction lows this morning, but did not have a similar negative impact on the IWM. The relative strength of the IWM could be the result purely of a massively oversold index (more oversold than the other major equity market ETFs), or perhaps we can ascribe a more fundamentally positive argument to its relatively strong behavior: If the small-cap index act well, maybe it means that the underlying economy remains ok, despite credit worries -- and strong enough, in fact, that smaller companies will be able to navigate well in the approaching "lower" interest rate environment? I don't know if that makes sense, but the price pattern carved out the IWM tells me that it is the only one of the major equity market ETFs in an advantageous technical position at this moment.
  • Action-Oriented Trade Set-Ups in Stocks & ETFs
  • Macro Analysis of the Broader Markets
  • Detailed Technical Guidance for each Trading Idea
  • Live Interaction w/ Mike & Our Member Community
  • And Much, Much More!
Join Now! - Special Offer!
Veteran Wall Street analyst and financial author, Mike provides detailed and timely analysis and trade set-ups on a range of markets. Read more...

Have Mike's “Out Front” morning analysis delivered FREE to your email inbox twice weekly!