By Rodrigo Campos
NEW YORK, April 6 (Reuters) - The Russell 2000 index came within reach of its all-time high set nearly four years ago, as it edged up on Wednesday, its seventh straight daily gain.
With momentum dipping from a recent high and oscillators nearing overbought levels, the index's charts are showing some technical weakness. But chartists say a new high is all but certain.
The Russell 2000 closed at 854.17 on Wednesday, leaving it 0.19 percent shy of its all-time closing high of 855.77 set on July 13, 2007.
The index, covering most of the U.S. small- and mid-cap universe, bounced off a low that followed a correction of more than 7 percent between mid-February and mid-March.
'People tend to underestimate the momentum in those types of corrections,' said Richard Ross, global technical strategist at Auerbach Grayson in New York.
'An all-time high is nothing to sneeze at in terms of technical resistance, but momentum is strong,' he said.
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Graphic: Russell 2000 near all-time high
http://r.reuters.com/wyp88r
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Still, the steep advance has left the index in a vulnerable technical spot. Its session high has coincided with the upper Bollinger band in four of the past six trading days, a signal of strong resistance to more gains. And it is coming against strong psychological resistance after a rally of more than 10 percent from its recent low.
'I don't see many additional new highs right away,' said John Schlitz, chief market technician at Instinet in New York.
'Moving to a new high is constructive, but I think we are well into this move so I don't think it will trigger any significant wave of small-cap buying.'
SIGNS OF STRENGTH
But not all charts are setting off alarms. The index's 20-day correlation with the euro has shot up to levels not seen since last November, coinciding with other periods in which investors are more willing to go after risky assets.
And its short-term correlation with Brent crude is also near the highs of the year, at 0.84. A strong correlation between energy and equity prices indicates that economic fundamentals are behind many of the moves seen in the charts.
'We have across-the-board strength,' said Auerbach Grayson's Ross. 'It's tough to poke holes in this story right now.'
On Wednesday, the S&P MidCap 400 index edged up 0.03 percent to close above 1,000 for a second straight day, its highest close on record.
The S&P SmallCap 600 index advanced 0.17 percent to end on Wednesday at 452.42, also a fresh historic high.
(Reporting by Rodrigo Campos; Editing by Jan Paschal)
((rodrigo.campos@thomsonreuters.com; +1 646-223-6344;
Reuters Messaging:
rodrigo.campos.thomsonreuters.com@reuters.net )) Keywords: MARKETS STOCKS/SMALLMID (For Reuters Top News on BridgeStation view story .134; on 3000 Xtra: http://topnews.session.rservices.com) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
NEW YORK, April 6 (Reuters) - The Russell 2000 index came within reach of its all-time high set nearly four years ago, as it edged up on Wednesday, its seventh straight daily gain.
With momentum dipping from a recent high and oscillators nearing overbought levels, the index's charts are showing some technical weakness. But chartists say a new high is all but certain.
The Russell 2000 closed at 854.17 on Wednesday, leaving it 0.19 percent shy of its all-time closing high of 855.77 set on July 13, 2007.
The index, covering most of the U.S. small- and mid-cap universe, bounced off a low that followed a correction of more than 7 percent between mid-February and mid-March.
'People tend to underestimate the momentum in those types of corrections,' said Richard Ross, global technical strategist at Auerbach Grayson in New York.
'An all-time high is nothing to sneeze at in terms of technical resistance, but momentum is strong,' he said.
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic: Russell 2000 near all-time high
http://r.reuters.com/wyp88r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Still, the steep advance has left the index in a vulnerable technical spot. Its session high has coincided with the upper Bollinger band in four of the past six trading days, a signal of strong resistance to more gains. And it is coming against strong psychological resistance after a rally of more than 10 percent from its recent low.
'I don't see many additional new highs right away,' said John Schlitz, chief market technician at Instinet in New York.
'Moving to a new high is constructive, but I think we are well into this move so I don't think it will trigger any significant wave of small-cap buying.'
SIGNS OF STRENGTH
But not all charts are setting off alarms. The index's 20-day correlation with the euro has shot up to levels not seen since last November, coinciding with other periods in which investors are more willing to go after risky assets.
And its short-term correlation with Brent crude is also near the highs of the year, at 0.84. A strong correlation between energy and equity prices indicates that economic fundamentals are behind many of the moves seen in the charts.
'We have across-the-board strength,' said Auerbach Grayson's Ross. 'It's tough to poke holes in this story right now.'
On Wednesday, the S&P MidCap 400 index edged up 0.03 percent to close above 1,000 for a second straight day, its highest close on record.
The S&P SmallCap 600 index advanced 0.17 percent to end on Wednesday at 452.42, also a fresh historic high.
(Reporting by Rodrigo Campos; Editing by Jan Paschal)
((rodrigo.campos@thomsonreuters.com; +1 646-223-6344;
Reuters Messaging:
rodrigo.campos.thomsonreuters.com@reuters.net )) Keywords: MARKETS STOCKS/SMALLMID (For Reuters Top News on BridgeStation view story .134; on 3000 Xtra: http://topnews.session.rservices.com) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.