Solid opening rally set for small caps after China stimulus
Small-cap stocks are expected to open solidly higher, boosted by gains in equity markets around the world on news that China will roll out a $586 billion economic stimulus plan. Stock index futures were up about 2% in overnight trading, which suggests the Russell 2000 (NYSE:IWM) will open near 515.75.
Around the world overnight, China shares were up 7.4%, Japan’s Nikkei climbed 5.8%, Hong Kong was up 3.5%, India rallied 5.7%, Australia was up 1.3% and European shares were up about 2% heading toward the U.S. open.
Commodity markets – and commodity-themed stocks – were on a roll overnight, with BHP Billiton, the world’s largest mining company, jumping some 13%. Crude oil prices were up more than $4 a barrel, while copper prices climbed 8% in Asian trading.
Individual stocks in the news included American International Group (NYSE:AIG), which was up some 20% in pre-market trading on news that the government plans to add another $27 billion to the aid package for the embattled insurance giant and buy some $40 billion in preferred stock.
Also, President-elect Obama said that help for domestic automobile manufacturers was a “priority,” which sparked a rise in General Motors Corp. (NYSE:GM) and Ford Motor Co. (NYSE:F).
If the market can leapfrog resistance at 514.50 on the opening and then hold above that point, then it would clear the way for a run toward 525 and a better test up at 534.50. If the market slips quickly back below 514.50, then mild support is around 507, then near the “figure” at 500.
Around the world overnight, China shares were up 7.4%, Japan’s Nikkei climbed 5.8%, Hong Kong was up 3.5%, India rallied 5.7%, Australia was up 1.3% and European shares were up about 2% heading toward the U.S. open.
Commodity markets – and commodity-themed stocks – were on a roll overnight, with BHP Billiton, the world’s largest mining company, jumping some 13%. Crude oil prices were up more than $4 a barrel, while copper prices climbed 8% in Asian trading.
Individual stocks in the news included American International Group (NYSE:AIG), which was up some 20% in pre-market trading on news that the government plans to add another $27 billion to the aid package for the embattled insurance giant and buy some $40 billion in preferred stock.
Also, President-elect Obama said that help for domestic automobile manufacturers was a “priority,” which sparked a rise in General Motors Corp. (NYSE:GM) and Ford Motor Co. (NYSE:F).
If the market can leapfrog resistance at 514.50 on the opening and then hold above that point, then it would clear the way for a run toward 525 and a better test up at 534.50. If the market slips quickly back below 514.50, then mild support is around 507, then near the “figure” at 500.
About the Author
Kevin Pendley covers the Russell 2000 index for SmallCapInvestor.com and writes a weekly technical analysis column.
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