A powerful bull market rally is emerging — but the window to make big money could come sooner than most Wall Street watchers think.
"The consensus view is we're going to be weak until the election, and once the election is cleared up, we're going to rally into the end of the year," Charles Harris, portfolio manager at O'Neil Global Advisors, told Investor's Business Daily's "IBD Live."
"But the market doesn't always cooperate with the consensus and what everyone is expecting," he said, with his bullish short-term outlook contrarian to that of those who view October as a seasonally weak period.
Bull Market Buying Opportunities
To succeed in the stock market, Harris says all investors need is just one strong period – and that period can be as short as a month or two.
Harris says the current market "feels like the latter part of 2007." At the time, the market saw a brief sell-off in August and a strong rally just before the 2007 financial crisis struck.
His analysis was focused on the technical action and the Fed's cutting cycle, and does not foresee a similar financial crisis looming.
"In that little window, I doubled my account in two months," he said. "That's all you need, just a window of opportunity."
Harris explains five key reasons why the bull market rally has room to run from here.
1) Macroeconomic Backdrop
Harris cites a positive economic outlook ahead, with a blowout September jobs report and the Fed committed to rate cuts.
"We're in an easing cycle and you don't fight the Fed," Harris said. He added that the market was so devastated by the Fed's tightening cycle that a loosening cycle is likely to be a huge tailwind.
2) Technical Action For Indexes
The major indexes are trending higher, with the Nasdaq and S&P 500 in power trends. Both are finding support at the key 21-day moving average and bouncing from there, something often seen in bullish market trends.
The S&P 500 is close to all-time highs, while the tech-heavy Nasdaq is back above 18,000 – a notable psychological level. September was a powerful month. This week's action is ending on a high note after an orderly bull market pullback.
"I think that everything is set up well for a strong year-end," he said.
3) Bull Market's 'Wall Of Worry'
Harris says the market is showing strength despite a "wall of worry," with big-picture fears not yet denting investor appetites.
Tensions in the Mideast remain high as Israel vows retaliation on Iran, which could expand the ongoing Israel-Hamas war.
The 2024 U.S. presidential election is also considered a potential risk event since the market does not like uncertainty.
Meanwhile, a three-day dockworkers' strike ended late Thursday after a sweetened offer from port owners — and immense pressure from the White House — ending fears of logistics snags.
When the bull market climbs a "wall of worry," that means there's still money sitting on the sidelines waiting to be deployed to fuel further gains in an uptrend. Unbridled enthusiasm, for instance, can signal exuberance and a potential market top.
4) Artificial Intelligence Innovation
Catalyzing bull market momentum is a backdrop of innovation and new technology, led by the generative AI boom.
"We're still at the very beginning of this new leg of AI and everything that it will offer," said Harris. He expects productivity gains across various industries and falling costs to boost companies.
5) Leading Stocks Acting Well
Harris cites strong stock leadership in the market that's broadening out, compared with earlier periods where only a handful of stocks led the market. Seeing more stocks participate strengthens the bull case vs. only having a handful of megacap tech stocks be the ones carrying the bull market rally.
A strong macro environment and underlying tech innovation create opportunities for sector leaders, but the chart does not always tell the full story. "Find some charts that you like, but then dig in deeper and build a level of conviction so you can hook a big winner and ride it for a significant move," said Harris.
Tesla is one stock Harris is eyeing as a potential leader in the bull market rally.
Tesla Stock Analysis
Harris says he sees a bull market move for Tesla stock in the near future, driven by the promises of a cheaper model and its use of generative AI in technologies like robotaxis.
He points to a potential cup-with-handle pattern forming in the stock as the automaker heads into both earnings and its robotaxi event in October.
Tesla stock is currently forming a 60-day cup pattern, according to MarketSurge pattern recognition. Harris sees a handle forming for the stock.
Pattern recognition currently does not show the handle as it does not yet meet the required gestation time of five days. However, the stock is bouncing off the 21-day line after a three-day pullback.
Robotaxis, Cheaper Cars Fuel Tesla Ambitions
Harris sees Tesla's expected cheaper model and its autonomous robotaxi as two catalysts. The robotaxi is reportedly set to build on Tesla's AI technology.
"It's gone through a long digestion period since its peak in 2021, and they've got (the robotaxi) event next week that I think is going to be really exciting," he says.
The elections present another risk for Tesla stock. Tesla could greatly benefit from a Trump victory in November because of CEO Elon Musk's support for the former president and candidate. Likewise, Musk's purchase of Twitter and antagonism of Democrats could damage Tesla stock if Harris wins the upcoming election.
A recent pullback in the stock runs contrary to what Harris typically sees in Tesla stock before big events. He says Tesla stock tends to sell off after a big announcement like its Cybertruck reveal in 2019.
"But this time the stock is selling off going into the event," said Harris. "Maybe that bodes well for change."
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