TradeMaster Daily Stock Alerts Blog

Small-cap stocks are expected to open higher, boosted by mild overnight gains tied to ideas Thursday’s slide was overdone. The overnight support gained momentum after a strong durable goods release this morning. The Russell 2000 (NYSE:IWM) was up about 0.5% in after-hours action, which suggests a cash open near 705.50.

The durable goods report came in much stronger than forecast, with the headline figure at 0.8%, compared with the median projection for a slide of 0.3%. The immediate response in S&P 500 futures was about a 4-handle bump on the report. It should be noted that durable goods is a June figure and seldom has a long trading shelf life, but the figure was a bullish surprise and could help stem some of the gloom from Thursday’s steep decline.

Later this morning, the market will get a chance to respond to consumer sentiment data from the University of Michigan survey, which comes out a little before 10:00 a.m. ET. Just slightly after Michigan, new home sales will complete a tame slate of data this week. Considering the market tanked after existing home sales Thursday, perhaps the new home sales figures will garner more attention.

Crude oil futures were up overnight heading toward the stock market open, with crude oil climbing back above $126 dollars a barrel. Even after the strong durables report, the U.S. dollar was still down against the euro, which was a supportive element for crude oil and gold. Given a sharp recent slide in crude oil, there may be some reluctance to press the market on black gold ahead of the weekend.

Looking at the chart picture, Thursday’s decline finished off a nice little evening star top on daily candlestick charts. Short-term momentum readings are no longer overdone and the pullback off the highs might have been wickedly strong, but is still consistent with a correction. It would take a slide back through 684 to suggest that a deeper pullback is in order and that the July lows might not have reflected a true bottom. From a short-term perspective, look for support this morning at 697, 691 and if things get really ugly again, the big point is down at 684. On the upside, resistance is pegged at 707.50, 715 and 720. The key upside spot is still at 726, but might be out of reach ahead of the weekend.

Stocks in the news overnight lacked big-name “punch” that spills over into the broad market, but stocks on the radar screen this morning include Lehman Bros. (LEH), which rallied overnight on news that the embattled broker might sell off part of the firm to raise capital. Also, small-cap firm Crocs (CROX), which makes plastic shoes, was getting clobbered overnight as the firm lowered its outlook. Columbia Sportswear (COLM) was also taking a beating in after-hours trade after earnings disappointed.

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