Another Reason to Bet on the Melt Up Today

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.

Remember, we are in the late innings of a massive Melt Up in U.S. stocks.

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.

Good investing,

Steve

Further Reading

Regular readers know Steve and his team use the COT reports to gauge sentiment across all sorts of asset classes. Recently, Chris Igou found extreme sentiment levels in another corner of the market that could point to a major rally in the months ahead... Get the details here.

"Sure, it's been a record-setting year in the markets so far," Brett Eversole writes. "But that doesn't mean the rally is over." In fact, he says a recent rare event signals more upside ahead... Get his take on it right here.

Market Notes
RURAL AMERICA'S TOP SUPPLIER IS BOOMING

Today, we’re checking in on a company thriving in a “niche” market…

As our colleague Dr. David Eifrig has said before, most consumers typically shop in two ways. We either grab “get anywhere” items as cheap as possible… or we go to stores with a specialized focus for the best quality. Today’s company has mastered its specialized market…

Tractor Supply (TSCO) is a $12 billion rural lifestyle retailer. Its product selection covers everything from auto parts and farming equipment, to garden supplies, to camping and fishing gear. As a “one-stop shop” for farmers and rural homeowners, this business draws in customers who stick around… which is great for sales. Last year, Tractor Supply reported sales of $7.9 billion, 9% higher than in 2017.

As you can see in today’s chart, TSCO shares are trending higher. The stock is up more than 70% over the past year, and it just hit a fresh all-time high. As long as rural communities still flock to Tractor Supply stores, this company should continue to thrive…