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Small caps, Apple and Lions Gate: What to watch today

As we start a new trading week here are three things you should keep an eye on today.

Number 1:

Will they buy the all-time high in the little guys?

That’s the question that greets the surging small-cap stock bellwether, the Russell 2000. It has sprinted higher seven of the past eight days and among the widely watched equity indexes it is alone in sitting at a fresh never-before-seen high.

The Russell 2000, tracked by a popular iShares ETF under symbol IWM, contains companies with a combined market value of $4 trillion – less than six Apple’s worth. Yet it contains all sorts of clues about risk appetites, liquidity, credit conditions and expectations for the US economy and dollar.

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When the U.S. dollar was racing to rapid gains against the euro, the outperformance of the domestic-focused small caps made sense. Now it’s a momentum proxy, a good measure of whether the gentle message of an eager-to-please Fed can deliver more than a week’s boost to animal spirits.

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The Russell looks set to back off moderately early Monday, which makes sense after the steep climb of the past couple of weeks. But watch to see whether and how aggressively any dip is bought, for clue about whether the broad market is set to bust out of a months-long range, or not.

Number 2:

The action in Apple Inc. (AAPL) shares right ahead of Friday’s close were less a dip than a mechanical dump. Some index rebalancing swamped the market with a chunky cluster of sell orders, and the largest stock in the world shed $11 billion in market value in a blink.

Apple TV revamp coming in June with Siri and App Store
Apple TV revamp coming in June with Siri and App Store

All else being equal, such an automated rearrangement of index weightings – if that’s what it mostly was – should be mostly reversed pretty fast.

Yet it’s worth noting that Apple has been backsliding – or, if you wish, consolidating – for the past month. The stock has underperformed both the S&P 500 and Nasdaq by more than five percentage points in the past four weeks.

This is a pretty negligible slip in the grand scheme, of course. Apple is still up a whopping 14% year to date and 65% in the past year. But the fact that such a key leader has faltered a bit shouldn’t be fully ignored.

As the week dawns, analysts are starting to make optimistic forecasts for what its reported new TV service might deliver in terms of profits. And chatter is building about a major upgrade to the iPhone 6, which has only been out six months.

Let’s see if any of this talk gives cover for Apple bulls to reassert themselves as we approach the end of the quarter in which the stock once again was touted as a “must-own.”

Number 3:

The critics hated “Insurgent,” the second entry in the teen-pleasing “Divergent” film series. But the kids came out for the $100 million, 3-D “mini-blockbuster,” leading it to the top of the weekend box-office ranks with a $54 million haul.

Actress Shailene Woodley attends The Divergent Series: Insurgent New York premiere at Ziegfeld Theater on March 16, 2015 in New York City (AFP Photo/Larry Busacca)
Actress Shailene Woodley attends The Divergent Series: Insurgent New York premiere at Ziegfeld Theater on March 16, 2015 in New York City (AFP Photo/Larry Busacca)

Lions Gate Entertainment (LGF) is the studio behind both this series and the “Hunger Games” franchise, and the stock stands as perhaps the best pure-play on entertainment content.

With so many new video packages being launched – from over-the-top services to mini cable bundles – there is a wide-open market for programs that can hook attractive niche audiences. Lions Gate has shown a knack for doing just that, with TV shows such as “Mad Men” in its stable as well.

Cable pioneer John Malone took a big Lions Gate stake and a board seat last month and the company struck a big production partnership in China. The stock has traded sideways this year. Ultimately, the company has significant scarcity value and could easily be bought. For now, we’ll see if the market sides with critics or teen fans in interpreting the message from the “Insurgent” opening.