Stocks Soar, Build Upon Last Week's Key Upside Reversal

Smart Moves for Today's Market Stocks Soar, Build Upon Last Week's Key Upside Reversal [Kevin Matras - EVP - Photo] Profit from the Pros By Kevin Matras Executive Vice President Stocks Soar, Build Upon Last Week's Key Upside Reversal [Stocks Soar, Build Upon Last Week's Key Upside Reversal]Image: Bigstock Stocks soared yesterday, erasing Friday's pullback, and building upon last Thursday's spectacular key upside reversal. A close above Thursday's high will be viewed as a confirmation that more upside could be coming. And that's what traders will be looking for. (Actually, the Dow and the Russell 2000 did that yesterday. Just need to see that for the S&P and Nasdaq next.) Last week's inflation reports showed that the Fed still has plenty of work to do to tamp down inflation. But worries about a deep recession may be a little overdone. Things have slowed this year with Q1 GDP down -1.6%, and Q2 down -0.6%. But Q3 is estimated to grow by 2.8% (according to the Federal Reserve Bank of Atlanta via their GDP Now forecast). And once the economy starts growing again, we are no longer in a recession. Another positive for the market right now is earnings season, which is currently underway. Since stocks typically go up during earnings season, there's plenty of excitement around this one. It also doesn't hurt that Q4 is typically the best quarter of the year for stocks. Even more so during midterm election years. In fact, Q4 of a midterm year is typically the second best quarter of the 4-year presidential cycle. And the best quarter is Q1 after the midterm year. So we are literally at the beginning of the best two quarters according to this cycle. Moreover, the third year of the 4-year presidential cycle (that's 2023), is historically the best year of the 4-year cycle. So from that perspective, things couldn't be better. Add in a grossly oversold market, and valuations at multiyear lows, and you have all the makings for a sharp bullish turnaround. Inflation, interest rates, and what that will mean for the economy, are still the key issues. But if inflation can keep ticking lower, and the economy can keep growing, then the market (which appears to have been pricing in the worst-case scenario), could see big upside potential if the worst-case scenario doesn't look like it will come to pass. And at the moment, the worst-case scenario does not seem to be unfolding. And stocks appear to be rallying because of that. See you tomorrow, [Kevin Matras - Signature] Kevin Matras Executive Vice President, Zacks Investment Research Sponsor [Forget tech, crypto, bonds, and treasuries – buy these instead]( All you have to do is own a small handful of these unique stocks… And you could retire wealthier than you would by trading, chasing the latest "hot" stock, or doing anything your broker tells you. 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