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New Highs for Emerging Market, Small-Cap ETFs Bolster Bulls


China leading emerging market ETFs to 52-week highs and new record levels for U.S. small-cap stocks are among the encouraging signals for the market and investors as 2013 kicks off in style.

The record high this week in the Russell 2000, an index of U.S. small-cap stocks, is a “positive sign” for the market along with the upside breakout in the transportation sector that lagged in 2011, says John Murphy, chief technical analyst at StockCharts. The iShares Russell 2000 (IWM) is a popular ETF for the market’s smaller companies.

After Wednesday’s “monster rally,” the small-cap benchmark is at an all-time high, even excluding dividends, according to The Motley Fool. [Outperforming Small-Cap ETF Eyes Record High]

“From a seasonal perspective, this is a good window for small caps,” Kimble Charting Solutions said in a note Wednesday. “With them back at 2007 highs, we have to watch them closely … if they break the old highs, money flows should chase them.”

Another constructive sign for the markets is iShares FTSE China 25 Index Fund (FXI) hitting a fresh one-year high and showing “new global leadership,” says Murphy at StockCharts.

“That’s also good for commodity markets and copper in particular,” he added.

FXI is up about 13% the past month to lead the so-called BRIC countries of Brazil, Russia, India and China. [The Winners and Losers in BRIC ETFs]

China has also lifted emerging market ETFs that have rallied to the highest levels in about a year and a half. [Emerging Market ETF Surges on Heavy Volume]

iShares FTSE China 25 Index Fund


Full disclosure: Tom Lydon’s clients own IWM.

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.