Is this Bull Market Over?

The SP500 is up over 17% year-to-date.

The tech-heavy Nasdaq100 has fared even better… up over 34%. This is the hottest start to a year in history for the index. That’s right… the best start ever.

And so far into July, the market has shown no signs of slowing down.

If you remember our weekly “The Inverted Yield Curve: Harbinger of Gloom & Doom”, it should not surprise you that in the face of a severe global economic slowdown, the markets are melting up first.

On Friday, the Industrial Select Sector SPDR Fund (XLI) had its highest weekly close ever.

But it wasn’t alone.

The Tech Sector ETF (XLK), which has large holdings in Apple (APPL) and Microsoft (MSFT), also closed this week at new all-time highs.

This is a big deal.

You see, industrials are what’s known as “cyclical” stocks. They tend to perform well when the economy is growing or, at the very least, healthy.

If you’re bullish, you want to see them perform well.

Tech is another “risk on” sector. It’s also the largest weighting in both the S&P 500 and Nasdaq 100. Due to its size, tech carries the market.

So, it’s hard to be too bearish when the most important sectors in the entire market is hitting new all-time highs.

But the performance of industrials and tech stocks are hardly the only reasons to be bullish.

In a minute, we share the most bullish indicator we’re watching. We’ll also tell you why the current rally in stocks may just be getting warmed up… and how to take full advantage of this opportunity.

But we want to first welcome you to The Discount Weekly. Each week, we look at the biggest issues facing traders and investors… and explain how they impact your portfolios.

Today’s issue is all about stocks… specifically why they’re likely headed much higher.

Now, we could share 50 different charts with you to explain why we’re bullish. But we’re not here to overcomplicate, confuse and bore you.

Instead, we’re going to keep things SIMPLE. After all, our tagline here is “Common Sense Trading & Investing”.

So, here are two of the most important charts we’re watching.

The first chart shows the recent performance of the U.S, Dollar Index. This index measures the dollar’s performance versus the euro, Japanese yen, and a few other major currencies.

When this index is rising, it means the dollar is outperforming other major currencies. When it’s falling, the dollar is underperforming its peers.

Stocks (and other risk assets like crypto) don’t like it when the dollar is rapidly strengthening.

They much prefer it when the dollar is falling… which is exactly what’s been happening and still happening right now.

You can see what we mean below. After trading sideways-to-lower for the past several months, The U.S. Dollar Index (DXY) just broke down in a big way.

This has given stocks, crypto and almost everything a boost recently. We could rebound here and rally a bit... but there’s absolutely no reason to think the dollar will change course significantly anytime soon.

In other words, we’re in a bullish environment. Plain and simple.

The million-dollar question is how to make the most of this opportunity.

Well, one area of the market that we’ve been watching like a hawk for months now is small caps.

You might recall we wrote our second Discount Weekly on this topic, well in advance of this breakout and we’re now up over 20% on that trade.

Small caps are exactly what they sound like. They’re smaller stocks. Their market caps range from $300 million to $2 billion.

For much of this year, small caps underperformed the market. But they’re beginning to wake up in a major way.

Here we’re looking at this chart of The Russell 2000 ETF (IWM), which invests in stocks that make up the Russell 2000.

We can see that IWM just broke the downtrend that it’s been in since late 2021. This is a major deal. It indicates a significant change in character for the group.

More specifically, it tells us that small caps have likely just begun a new uptrend.

Large and mega cap stocks, on the other hand, have been rallying strongly for months.

For this reason, we think small caps could be an excellent catchup trade in the back half of 2023… especially with the dollar still under a lot of pressure.

The Discount Telegram Channel members are already capitalizing off this…

We called out how we were taking 2025 Call Options on the IWM and risking them to zero. The options are up 20% already and if this is the beginning of a new uptrend, we’re just getting started.

We also recently put on a swing trade in HubSpot (HUBS), one of today’s leading software stocks.

So far, the trade has been going according to plan. HUBS broke out of its bull flag this past week, and ultimately closed the week up 8.3%... massively outperforming the market. We took profit already and are letting the rest ride, risk-free and emotionless.

Also, we will be launching The Discount Portfolio soon. Here you can track all of our long term, mid-term, and short-term trades in real-time, with common-sense analysis for each position we take.

A service that anyone, from beginner-to-advanced, can easily understand and take advantage of.

Be sure to subscribe via email, if you haven’t already, to receive the notification when our portfolio service launches.

Don’t forget to follow on YouTube for video breakdowns and news.

Until The Discount Portfolio launches, we update everyone in our Telegram Channel on trades we are taking, currently in, and keeping our eye on.

For now, stay tuned and have a great rest of your weekend.

See You Next Sunday!