Small caps stocks have been leading the way higher recently. To give you a sense of how hot small caps have been, the Russell 2000 Small-cap Index (IWM) has traded higher on nine consecutive days! It is now up nearly 7.5% this month (and it's only March 10th). On one hand, it's enticing to jump on-board while the momentum is hot; however, nothing goes up forever so I am expecting to see the uptrend take a pause (but one can never know in advance when that might happen). To give some context on the situation I pulled up a monthly chart of IWM (below) and noticed a fairly well defined range that has developed over the past five years and IWM is just now back into that range. I'm not an expert in technical analysis, but I wouldn't be surprised to see this range continuing as we go forward. That would mean if IWM can close March inside this range then it could oscillate back and forth between about 65 and 75 for the better part of a year. Of course, that's just one possible scenario.
Wednesday, March 10, 2010
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