TradeMaster Daily Stock Alerts Blog

Small-cap stocks are expected to open solidly higher, bolstered by positive earnings news overnight in the tech arena, more rate cuts out of Asia and a bounce in European bank stocks. The Russell 2000 (NYSE:IWM) was up about 1.6% in after-hours trading, which would suggest an open near 555.00.

The weekly claims report came in at 478,000, which was fairly close to the consensus forecast of 475,000. The government revised last week’s number up to 498,000 from 495,000 and continuing claims rose to 3.6 million to the highest point since June 2003, while the four-week moving average was the highest since October 2001. These figures are clearly not good for the employment picture, but they also were not a surprise. The immediate market reaction to the claims was a mild uptick in stock index futures.

In overnight news, International Business Machines Corp. (NYSE:IBM) posted better than expected quarterly results, which provided an upside spark for not just IBM – which was up 4% — but for tech shares in general. Nasdaq 100 futures were up about 1.5% in after-hours trading, and Apple Inc. (Nasdaq:AAPL) was up 3%.

Other news events this morning to keep in mind were comments from the Treasury Department that the government was considering taking an ownership stake in several major banks to shore up confidence in the banking sector. Also, the 4-week long ban on short selling in financial stocks expires today. The Jewish holiday Yom Kippur is today, which could think out volume a touch in the markets.

In Asian trading, rate cuts were announced in Hong Kong, Taiwan and South Korea. And in Europe, the ECB said they would provide loans at low capped rates to banks, which helped spark a rally in bank stocks. The European stock market was up about 1% and Russia was up some 17% after halting trade earlier this week because of massive losses. Asian equities were mixed despite the rate cuts, with Japan down 0.5%, Hong Kong up 3.8%, China down 1.3%, Taiwan down 1.4%, Australia down 1.5%, Singapore up 3.4% and South Korea up 1.0%.

The chart picture for small-caps had promise until the breakdown in the final 30 minutes of trading Wednesday, but higher price action today would help build a potential short-term bottom. If the market can sustain a higher opening this morning, then minor initial resistance is at 561, but the key point to crack is at 567. Above there, resistance is at 575. Meanwhile, if the market starts to falter again, support will be at 550 and 546, then there is a vacuum back down to the recent lows near 537.

For important information and a disclaimer, click here.