Gold, banks, homebuilders pace tame rise

Kevin Pendley | Feb 11, 2009 12:54pm EST | Comment

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Small-cap stocks remained higher into mid-session, supported by gains in gold stocks, banks and homebuilders but the rise was taking place on fairly light volume and in the shadow of Tuesday’s big collapse. At 12:27 p.m. ET, the Russell 2000 (NYSE:IWM) was up 3.29, or 0.74 at 449.06.

Investors continue to sit on their hands waiting for news out of Washington, as hearings on the first tranche of TARP spending take place. In addition, lawmakers still have to piece together the House and Senate versions of the stimulus bill to present to President Obama for signing. And of course, the biggie is to see whether or not the Administration can mount some type of spin control off the disastrous market response to the Treasury Department’s rollout of the bank bail out plan Tuesday.

The big question facing market watchers so far today is whether or not the rise is simply a dead cat bounce from hot money shorts booking profits from Tuesday’s swoon, or if there are legitimate buyers coming in to find bargains and beaten down shares. Light volume and limited ranges tilt the answer toward the dead cat side of the ledger, but it is comforting to see that the Russell held above the late January lows despite a breach from the Dow.

As for sector activity, gold bugs were a happy lot today; gold futures were up over 3% to four-month highs, the Gold and Silver Index was up 7.5% at midday, small-cap gold stock Golden Star Resources Ltd. (AMEX:GSS) built on morning gains to climb 12.5% and big-cap group leader Newmont Mining Corp. (NYSE:NEM) rose 8.4%.

Real estate services shares, homebuilders, insurance brokers and photo product companies were also doing well so far today, sharing the spotlight with diverse financial services firms, regional banks and asset management specialists.

That’s not to say that everything was peaches and cream today; constructional material firms, paper products companies, industrial real estate investment trusts, footwear companies, gas utilities and oil exploration firms were all on the losing side of the ledger. Energy stocks gave back morning gains to slip into the red as crude oil prices slipped off the highs following weekly inventory data that showed a larger-than-expected rise in crude oil stockpiles.

Since volume has been relative modest so far today, it might be worth seeing which small-cap stocks are attracting unusually brisk turnover. China Healthcare Acquisition Corp. (AMEX:CHM) was up only fractionally, but generating a huge spike in volume today without any apparent fresh news. ISTA Pharmaceuticals Inc. (Nasdaq:ISTA) was up 12% on a jump in volume and also was at the highest price point since last September. VNUS Medical Technologies Inc. (Nasdaq:VNUS) was up 11%, climbing to the highest point since October while receiving an earnings-related boost. On the downside, Waste Services Inc. (Nasdaq:WSII) fell 8% on brisk volume, sinking to fresh 52-week lows.

From a charting perspective, the Russell faces resistance on a bounce today approaching 450, then a better test likely is near 454. Above that point, the next resistance zone is near 461. If the market starts to wobble this afternoon, then support should be seen at 443.40, then down near 437.50.