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OPINION

Assumptions Spark Rally

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.
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Oil companies are assuming that a deal will be done in Doha, Qatar’s capital and Wall Street is assuming that earnings will beat watered-down estimates. We know what they say about assuming, but if these hunches are correct, it could be the one-two punch, which will get the Dow Jones Industrial Average back to 18,000 and the S&P 500 to 2,109.

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The action in grounded momentum and tech names hints at a return of hot money that makes the old guard nervous; it also means great confidence, which is the kind of boost we need because stocks stopped climbing that proverbial wall of worry.

We could be on the cusp of a major breakout today if the Dow can get through and close above 17,800, along with the S&P 500 above 2,072. This period for the market is probably a lot more exciting than you think; there is a longer-term trend developing that suggests a failure to rally above S&P 500; 2,109 would mark a lower high and trigger selling.

Potentially, we have the perfect storm of steady rates (with the first quarter 2016 (1Q16) Gross Domestic Product (GDP) that is barely in the plus column that the Fed isn’t going to hike). And an earnings trough (yes, that’s something of a leap), coupled with a so-so investor sentiment that’s anything but irrationally exuberant.

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If those tech names, including Apple (AAPL), Netflix (NFLX), and Facebook (FB) can gain traction, the NASDAQ Composite could rally to 5,000, where it would see symbolic resistance and a greater challenge around 5,200.

With yesterday being the best one-day gain for the Dow Jones Industrial Average since March 11 and the S&P 500 and NASDAQ since April 6, there will be greater expectations from today’s session.

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