Bullish double bottom in small cap shares

Posted Nov 28th 2007 10:39AM by Michael Panzner
Filed under: Indices, Market Matters, Money and Finance Today, Technical Analysis, S and P 500

Small cap stocks have lagged the broader market for most of this year. Through early this morning, the Russell 2000 index -- which has an equivalent exchange-traded fund, the iShares Russell 2000 Index ETF (AMEX: IWM) -- has dropped by 4.3%, while the S&P 500 index has gained 1.7%.

Nonetheless, with investor optimism at multi-year lows, the prospect of another Fed rate cut at the next meeting on December 11th, and some reassuring news from the financial sector, share prices could be bolstered in the near term by some contrarian bargain-hunting.

Technically speaking, the Russell 2000 has formed a bullish double bottom on both the absolute and relative charts. Given that, small cap shares may be just the way to play a near-term corrective bounce.

Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle.

Tags: double bottom, DoubleBottom, featured, iwm, russell 2000, small cap