Micro-caps Continue to Set New Records

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bottle cap Micro-Cap Market Report: July 27, 2013 – Micro-caps moved higher but it was not the most eventful of weeks for the majors, indicating that the summer doldrums may be starting to set in. There was a small two-day losing streak for the S&P 500 earlier in the week, the first such streak in over a month, but the real excitement came in the form of a sharp late-day reversal Friday that saw the major U.S. indexes move well-off their lows of the day to close slightly higher.

For the week, the Dow increased 0.1 percent, the S&P 500 was flat and the Nasdaq Composite was the leader with a gain of 0.7 percent.

Micro-Caps Still Hot

It was a decent week for micro-caps as surging metals miners helped out quite a bit. The iShares Micro-Cap ETF (NYSE: IWC) touched a new all-time high as did the First Trust Dow Jones Select MicroCap ETF (NYSE: FDM). The Guggenheim Wilshire Micro-Cap ETF (NYSE: WMCR) came close to doing the same, but was still the best performer of the micro-cap ETFs this week.

The Markets @ 7/26/2013
Index Close Weekly % Change YTD Change YTD%
DJIA 15558.83 15.09 0.10% 2454.69 18.73%
NASDAQ 3613.16 25.55 0.71% 593.65 19.66%
S&P 500 1691.65 -0.44 -0.03% 265.46 18.61%
NYSE Comp 9620.13 1.62 0.02% 1176.62 13.94%
NYSE MKT  2353.49 -0.38 -0.02% -2.17 -0.09%
RUS 2000 104.12 -0.19 -0.18% 20.04 23.83%
RUS MICRO 66.85 0.21 0.32% 14.53 27.77%
VANG INTL 48.17 0.25 0.52% 1.87 4.04%
CHINA INDEX 5544.09 223.1 4.19% 1105.57 24.91%
EMERG MKTS 6561.08 50.34 0.77% -478.89 -6.80%

 

Market Report

In economic news, the National Association of Home Builders/Wells Fargo builder sentiment index climbed to 57 this month from 51 last month. The July reading is the highest since January 2006. Readings above 50 indicate builders view the market as good.

New home sales advanced 8.3%, the best rate in five years. The seasonally adjusted rate was 497,000 units. Economists expected 484,000. May’s sales rate was also revised up to 459,000.

On Thursday, the U.S. Labor Department said initial claims for jobless benefits rose by 7,000 to 343,000 last week. Economists expected a reading of 340,000 new claims. The unemployment rate among people eligible for benefits dropped to 2.3 percent in the week ended July 13 from 2.4 percent the prior week, according to Bloomberg.

Durable goods orders jumped 4.2% in June after a revised 5.2% increase in May. Analysts expected an increase of just 1.4%.

And on Friday, the Thomson Reuters/University of Michigan final index of consumer sentiment for July rose to 85.1 from 84.1 last month. Economists expected a July reading of 84. The initial July reading was 83.9.

Overall, those economic reports were decent, but not good enough to boost oil prices, which sagged late in the week.

The good news is the economic data were tepid enough that traders are not concerned about the Federal Reserve ending quantitative easing anytime soon and that should be a positive catalyst in the near term for micro-cap gold and silver miners.

It Was a Relatively Quite Week Except for China…!

The big mover again this week was the NASDAQ Golden Dragon Index which posted another blistering gain of 4.19% as it moves close to a 25% gain YTD.

The iShares Russell Microcap Index and the Guggenheim Wilshire Micro-Cap ETF continue to move higher…52-week highs at 27.77% and 31.17% respectively. The Russell 2000 gave back 0.18% last week but is hanging onto a 24% YTD gain.

Oil was down but gold was up

Oil prices closed Friday at $104.70 (off $3.35 for last week)… gold moved over the $1300 level; closing the week at $1,321.70, up $28.40.

The US Dollar was off again – $0.0079 to close at 0.753 euros.

The bond seesaw is alive and well… but moving down. The 10-year bond lost $0.56 to close at $93.02 and the 30-year bond lost $0.75 to close at $86.52.

The Bottom Line for Stocks

To put things delicately, this week is one crucial to the near-term fate of the bulls. We’re cautious on micro-cap energy stocks due to the fact that a swath of big oil companies deliver results next week and energy sector earnings have not been great to this point.

More importantly, there is another Federal Reserve meeting and the July jobs report. Ahead of both of those marquee events, we’re feeling better about miners, but the Fed will decide the fate of those stocks. The Fed and the jobs report will decide the fate of micro-cap discretionary names and there are still opportunities among financial services and health care micro-caps.

Research and Editorial Staff
MicroCap MarketPlace
Mike Casson, Executive Editor

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