Close at highest weekly level since last December

Small-cap stocks survived one of the most dramatic weeks in equity history; wait, they not only survived a stressful week, but in the end, the bulls ran roughshod on any Johnny-come-lately bears as the Russell 2000 (NYSE:IWM) stormed to the highest weekly close of 2008.

Yep. You read that right. After suffering the two largest one-day declines of the year while the Dow was blitzed by the largest swoon since the 9/11 attacks seven long years ago, small-cap stocks rebounded late in the week to close at the highest weekly level since last December.

Actually, “rebounded” is probably too tame to describe the stunning rally that took place Thursday and Friday in the stock market. We can debate until we’re blue in the face whether or not the government has any business rescuing financial firms from the brink, and whether or not they should restrict short selling practices, but the fact is that on a weekly basis NEARLY EVERY SINGLE SHORT IS HOLDING A LOSING TRADE RIGHT NOW.

In addition to the obvious bullish equity position of the market at this moment, the pattern picture is pretty impressive as well. For starters, weekly charts sport a bullish outside reversal pattern off lows for the move. The last time that took place just happened to be the summer bottom that kicked off the run to the August highs.

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