Russell to open higher on dip in crude oil
Small-cap stocks are expected to open higher, buoyed by a pullback in crude oil prices overnight and by short-covering amid oversold conditions following last week’s sizable decline. The Russell 2000 (NYSE:IWM) was up about 0.5% in after-hours trading, which suggests an open near 668.
Crude oil futures pulled back about $2.50 dollars a barrel overnight toward the $142 level, which is a welcome sign for equity market investors following a push to record high oil prices last Thursday ahead of a holiday weekend in the United States. Still, geopolitical tension between Iran and Israel percolates in the background and is likely to remain a supportive element.
Large-cap stocks in the news this morning that could ripple into other stocks include automakers, which are expected to rise this morning after being beaten down for months on end. Both General Motors Corp. (NYSE:GM) and Ford (NYSE:F) shares were up about 3% in after-hours trading.
Time Warner (NYSE:TWX) was up about 0.6% overnight, and could benefit from a bullish article in Barron’s magazine. Also, look for airlines to benefit from the dip in energy prices. Northwest Airlines (NYSE:NWA) was up about 4% overnight, and small-cap carrier US Airways (NYSE:LCC) was up about 2%.
Looking at the chart picture, the market is oversold on daily and intraday momentum readings, which heightens the potential for a correction or sideways consolidation early this week. The 14-period Relative Strength Index (RSI) on daily charts is at the lowest point since the March bottom, and weekly RSI readings are approaching levels that coincided with the lows in January and March. Important short-term support is evident today in the Russell at Thursday’s lows near 661, which mark a double bottom on hourly charts. From there, minor support is at 654, then the next big level is down at 650. On the upside, look for resistance today at 672 and 679.
