TradeMaster Daily Stock Alerts Blog

Mild opening gain dulled by crude rise

Small-cap stocks are expected to start out the week slightly higher, supported by residual positive psychology on the inflation front following last week’s collapse in crude oil prices. The Russell 2000 (NYSE:IWM) was up 0.1% in after-hours trading, which would translate to an open near 735.00.

Even a $1-dollar-a-barrel bounce in crude oil prices back above $116 overnight wasn’t enough to pull down stock index futures to negative territory in after-hours trading. Energy markets were lifted by concern that the military conflict between Russia and Georgia could hamper transport of oil from the Caspian region.

A big part of last week’s upside breakout in small-caps was a dramatic rally in the U.S. dollar, which also played into the crude oil decline. The dollar was flat against the euro after soaring to 6-month highs last week. Meanwhile, the greenback was down 0.5% against the yen.

In large-cap equity news, there were news reports ahead of the open that United Parcel Service Inc. (NYSE:UPS) would pay some $15 billion for Dutch rival TNT NV. TNT shares rose 6% in European trading, but UPS characterized that report as a “rumor” and said the company is focusing on transportation hubs in China.

The chart picture for small-caps starts out the week on a very positive note following bullish reversal formations on daily charts Friday, and an upside breakout through the recent congestion zone. The upside target on that breakout is 32 handles, which comes in at 758, which would then bring on a test of that early June peak. From a short-term perspective, look for support today at 726; in order to validate last week’s breakout move, 726 needs to hold as support the next couple of days. Below 726, support is at 720.50. On the upside, resistance is at 742, 748 and the “figure” line at 750.

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