Bulls Cheer Small-Cap Rally, but Not So Fast

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Stocks crept higher on Thursday as a result of a bounce in the price of oil and a strong economic report from the Philly Fed. Both energy stocks and small caps responded with the Russell 2000 taking the lead, up 1.1%.

Earnings helped move the indices higher, too, with Best Buy Co Inc (BBY), Williams-Sonoma, Inc. (WSM) and L Brands Inc (LB) reporting better-than-expected quarterly earnings.

The gains made in retailers and some high-beta chipmakers were not mirrored by biotech stocks. The iShares NASDAQ Biotechnology Index ETF (IBB) fell 0.1%.

Weekly initial claims fell to 291,000, but analysts had expected a decline to 285,000. CPI was unchanged, and existing home sales increased to 5.26 million in October — the largest gain since May.

The big news was that the Philadelphia Fed’s Business Outlook jumped to 40.8 in November from 20.7, while analysts only expected 18.3.

At Thursday’s close, the Dow Jones Industrial Average gained 33 points to 17,719, the S&P 500 rose 4 points to 2,053, the Nasdaq jumped 26 points to 4,702, and the Russell 2000 gained 13 points at 1,171.

The NYSE traded a total of 3.1 billion shares, and the Nasdaq crossed 1.7 billion. On both major exchanges, advancers outpaced decliners by about 2-to-1.

Russell 2000 Chart
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Chart Key

Despite all the talk Thursday about a rebound in the small caps, the Russell 2000 is still a long way from breaking to a new high at the double tops at 1,213. It held at the key support line at 1,164 and its 200-day moving average at 1,148. However, a death cross still looms, and now both MACD and momentum have gone negative.

Conclusion

I’ve often said in the Daily Market Outlook that price means all, and when it tells you a bullish story, you had better be listening. The opposite is also true, and the chart of the Russell 2000 is top heavy. It took enormous effort to drive it to its 200-day moving average from the October lows. But now it looks to me like it has run out of fuel needed to keep it moving.

What would change my mind? A poke through the Nov. 12 high at 1,187 might launch an attack on the twin tops at 1,213. But much higher volume and breadth (around 4-to-1 or more) are needed to overcome that high.

The bulls need relief, and despite all of the positive talk Thursday, the rally accomplished little.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.


Article printed from InvestorPlace Media, https://investorplace.com/2014/11/daily-market-outlook-bulls-cheer-russell-2000-fast/.

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