Sinking crude, rising dollar provide small-cap lift
Small-cap stocks are expected to open higher, lifted by an extension in the crude oil pullback, solid action in the U.S. dollar and a decent tone on the earnings front. The Russell 2000 (NYSE:IWM) was up about 0.3% in after-hours trading, which suggests an open near 719.
Crude oil prices continued to slide after Tuesday’s big decline, and were down about $2 dollars a barrel heading toward the U.S. stock market open, with benchmark crude prices around $126.50. The decline in energy levels was tied to ideas that Hurricane Dolly would not threaten a large portion of production in the Gulf of Mexico.
The downdraft in energy prices this week has been accompanied by a resurgent U.S. dollar, which was up about 0.2% against the euro and 0.4% versus the yen just in front of the stock market open.
On the earnings front, McDonald’s Corp. (NYSE:MCD) topped the forecast, was up about 2% in after-hours trading and should provide a lift to large-cap index products. Pfizer Inc. (NYSE:PFE) was up about 3% after solid results, but Washington Mutual (NYSE:WM) was off about 3% before the opening bell after sloppy quarterly results. Also, wholesaler Costco Wholesale Corp. (Nasdaq:COST) was down some 6% overnight after the firm warned it would miss Street projections.
From a technical analysis standpoint, the Russell 2000 should open into, or even through an important resistance test at 717.50. Sustained action above that point puts the next resistance points to watch at 720, then at 726. If the market starts to falter today, then support is at 707.50 and 701. Some intraday momentum studies are actually a little bit overbought, which could stall upside progress, the as you move out in time frame the market clearly has a way to go before hitting overdone levels. It’s worth noting that now the market has hurdled above the 20-, 50- and even 100-day moving averages. The last time the Russell 2000 popped back above the 100-day moving average off a bear market bottom in March, it helped validate signs that a major upside push was underway.
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