Smallcap Stocks: Regaining Their Mojo?

by: Paul Castro August 12, 2008 | about stocks: IWM    
Paul Castro

Paul Castro

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"You know what have we learned here today? Perhaps it's that no one can take your mojo." -Jerry Springer (playing himself) to Austin Powers (played by Mike Myers), The Spy Who Shagged Me (New Line Cinema 1999)

The Russell 2000 is very close to registering its second consecutive higher rally high. This impending second consecutive higher rally high solidifies my contention, as stated in a previous post, that small cap stocks are in an uptrend which traces its genesis to the March 17th lower pullback low.

I use the terms 'rally' and 'pullback' to define intermediate-term moves. For my purposes it takes a move of greater than 5% from a previous low/high to qualify as a rally/pullback. Trends are longer term in nature with an uptrend being a series of higher rally highs and higher pullback lows while a downtrend is a series of lower pullback lows and lower rally highs. For all terms I look only at the daily closes, not intraday readings.

Since the beginning of 2008, the following has been the progression of pullback lows and rally highs:

Date / Russell 2000 Close / # of calendar days from previous pullback low or rally high / % gain(lost / phase

01.22.2008 / 671.57 / 27 / (15.74%) / lower pullback low
02.01.2008 / 730.50 / 10 / 8.77% / lower rally high
03.17.2008 / 650.48 / 45 / (10.95%) / lower pullback low
06.05.2008 / 763.27 / 80 / 15.04% / higher rally high
07.15.2008 / 662.31 / 40 / (13.23%) / higher pullback low
08.11.2008 / 751.06 / 27 / 13.40% / higher rally high on a close above 763.27

For a graphical depiction, click here.

I believe this rally still has some more to go and this uptrend still has a ways to go. This particular rally has lasted 27 days thus far and posted a 13.40% return. Since 1988, the Russell 2000 has completed 60 rallies with the average rally lasting 83 calendar days and posting a 17.16% return. This particular uptrend has thus far lasted 144 calendar days and posted a 15.46% return. Since 1988, the Russell 2000 has completed 8 uptrends with the average uptrend lasting 704 calendar days and posting a 64.71% return.

 

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This article has 2 comments:

  •  
    Aug 12 02:37 PM
    Sounds like from your facts that the rally is very close to an end...

    Middle of August is not the best time to go long anything.
    Reply | Link to Comment
  •  
    Aug 18 11:04 AM
    I think small caps will lead the market our of the recession, nothing unusual there.
    Reply | Link to Comment
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