Russell 2000 Hits All-Time High... DJIA and S&P 500 Next?

2013 has been a stellar year for stock investors, and long-term bond investors have been finding out that they actually can have real losses. After a very volatile June, many investors may have been appreciative if they followed the “Sell in May and go away” philosophy. The problem now is that was then and this now. The Russell 2000 just new highs! Investors have to start wondering if they should start appealing to their greed over their fear as this might be the catalyst that drives the Dow Jones Industrial Average and the S&P 500 back up to new all-time highs as well.

The Russell 2000 hit a high of 1,018.93 on Tuesday, and this is now almost two weeks after the Russell indexes had their multi-billion rebalances. That means that the noise and volatility of index component changes should be factored out of the equation. This also means that stock mutual funds, ETFs, hedge funds, other institutions, and hopefully the retail investor are all getting to ride the stock market to new highs.

The Russell 3000 includes many more small-cap stocks, but it is not at new highs. The larger index hit a high of 985.36 on Tuesday against a 52-week range of 781.88 to 1,002.59. Now look at the DJIA, where the index of 30 top stocks hit a high of 15,320.15 against a 52-week range of 12,471.50 to 15,542.40. Then the S&P 500 Index hit a high of 1,654.10 on Tuesday versus a 52-week range of 1,325.41 to 1,687.18.

Investors know that indexes usually chase each other. In short, if the Russell 2000 acts as any barometer then many stocks and many sectors still have room to run. For the indexes to hit new all-time highs yet again in 2013, there would have to be the following moves (in percentages):

• Russell 3000 1.75%
• DJIA 1.45%
• S&P 500 1.99%

*ALL LEVELS TAKEN at 2:00 PM EST ON 7/09

Be advised that if these levels hold then it marks a fourth day of gains for stocks. One of those days was with very limited market participants, and the same might be true of two of the other days as well. The 10-Year Treasury yield is now 2.64% and the 30-Year Treasury yield is at 3.65%.

And to think that all of this is happening right after so many in the market were fighting about whether the end of some of the Fed’s quantitative easing was coming sooner rather than later. What a difference a few days can make.