If you’re fearful of what’s next for stocks… you’re not alone.
Folks are almost unanimously nervous about the recent rally in the markets. But that fear you feel is exactly why stocks still have plenty of upside ahead.
It’s the last surge higher before the impending “Melt Down.” And today, I’ll share another reason why betting on the Melt Up is the right move now.
You see, futures traders are making huge bearish bets on the Nasdaq 100 Index – a large-cap index with a strong focus on technology stocks. And that means we still have big potential upside from here.
Let me explain…
Longtime readers know that bull market peaks typically happen alongside a major buying frenzy.
Investors speculate that stocks will continue to move higher. They bet on the “greater fool” theory that prices can rise indefinitely, because someone out there is always willing to pay more.
That’s what happens before the end begins. But we’re not there yet…
In fact, investors are actually fearful of today’s market. One way to see this is through the Commitment of Traders (“COT”) report. It’s a weekly survey that tells us what futures traders are doing with their money in real time.
It’s a great contrarian tool you can use to know what the crowd is betting on. When the crowd bets in one direction, the opposite is likely to occur.
Today, we are seeing big bets against the Nasdaq 100 Index. Again, this is a major U.S. index with an emphasis on tech stocks. And futures traders just hit multiyear bearish levels on tech stocks based on the COT. Take a look…
Futures traders recently made record bets on lower prices for tech stocks. The last time we saw a similar extreme was last spring. The index spent the next several months marching higher, rising by double-digit percentage points.
Before that, we hadn’t seen a reading this negative since 2010. And as I’m sure you know, tech stocks have soared hundreds of percent since then.
As the bull market continues, traders will pile back into U.S. stocks. That’ll cause a frenzy of higher prices. It’s a virtuous cycle that will fuel the Melt Up… causing prices to rise higher than anyone could imagine.
That’s not happening yet. When it does, U.S. technology will be a big winner… Tech stocks absolutely soared during the last Melt Up in the late 1990s, racking up triple-digit returns in the last year of the boom. And I expect them to win big this time, too.
So please, don’t follow the crowd… Don’t get scared out of stocks now.
If you’re still standing on the sidelines of today’s rally, you could miss out on possible triple-digit gains before the final peak arrives. Don’t make that mistake.
Source: Daily Wealth