Markets Could Break All-Time Highs

Stocks may have just bottomed…

If so, stocks could rip hard in the coming weeks… and take many investors by complete surprise.

We know this because fear has STILL running rampant.

The graphic below says it all. You’re looking at the CNN Fear Index, one of today’s most popular sentiment indicators.

As we explained last week, high reading indicates euphoria. A low reading tells us investors are scared.

Last Sunday, the index showed a reading of 28.

During the week, this indicator slid into “extreme fear” territory… before ending the week at 29.

This means investors are still quite nervous… even though stocks closed the week very strongly.

On Friday S&P 500 jumped 1.2%, erasing damage from earlier in the week.

The world’s most important index closed the week up 0.5%, knocking its first green weekly close in a month.

The tech-heavy Nasdaq 100 fared even better. It gained 1.8% on the week, good for its second consecutive positive weekly gain.

These aren’t monster movers by any stretch of the imagination. But it’s a start…

In fact, the market could be setting up for a strong rally.

We’ll explain why we’re bullish on stocks in the near term in a minute. But we first want to welcome you to The Discount Weekly. Each week, we examine the biggest issues facing traders and investors… and explain how they impact your portfolios.

This week’s focus is once again the stock market… specifically why stocks could be setting up for a powerful bounce.

Let’s start by looking at some charts…

First up is the S&P 500.

Notice how it reclaimed its August 2022 highs last week. That’s a big deal.

As we’ve explained before, those summer ‘22 highs are a major “line in the sand.” So, it was encouraging to see bulls defend this level the past two weeks.

And that’s not the only positive takeaway from this chart.

The S&P 500 is also back above its rising 40-week moving, as well as its 200-day moving average. This tells us that the longer term uptrend for stocks is still intact.

The Nasdaq 100 ETF (QQQ) weekly chart is even more constructive.

Not only did Nasdaq get their second consecutive weekly green candle, it also appears to be painting a “bull flag” pattern.

This consolidation pattern forms during uptrends. If successful, they break out to the upside… kicking off the next leg up.

In other words, the QQQs could be setting up for a big move higher.

Having that, we’re still waiting on confirmation. But we could get that “buy signal” soon…

We say that because the market’s most important stocks are acting well.

You can see what we mean below. This chart shows the performance of the Technology Sector ETF (XLK), which invests in large technology stocks like Apple (AAPL) and Microsoft (MSFT).

Last week, XLK rallied 2.6%... making tech the second strongest sector in the market after communication stocks.

More importantly, XLK now appears to be painting a bull flag… just like the QQQs.

If tech stocks break out to the upside, it’s going to be hard to be bearish on stocks.

After all, tech makes up 28% of the S&P 500 and 49% of the Nasdaq.

At the same time, semiconductors are holding up quite well. See for yourself…

Like the QQQs and XLK, the Semiconductor ETF (SMH) appears to be printing a bull flag here. An upside breakout in semis - one the most important “bellwether” industry groups - would be a huge win for the bulls.

In summary, the market is looking the best it has looked in weeks. But that doesn’t mean you should dive head first into the markets.

Interest rates are still surging… and a major military conflict has broken out in the Middle East.

In other words, it wouldn’t surprise us if the market changed on a dime in the coming weeks.

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See You Next Sunday!