This correction is close to over. And when it ends, stocks will rally hard to new all-time highs.

How do I know this?

Because the market internals are telling me.

Historically, high yield credit leads the stock market. The reason for this is because high yield credit (read: junk bonds) is MUCH more sensitive to macro changes due to the fact that when the economy rolls over, junk bond investors typically lose a LOT of money very quickly.

Because of this, high yield credit acts as a kind of “canary in the coal mine” for the financial system. If something BAD is coming, this is the first area to react.

High yield credit (red line in the chart below) just hit new all-time highs. Indeed, based on high yield credit, the S&P 500 should be north of 5,600 right now. This is NOT bearish for risk assets including stocks.

(Click on image to enlarge)

High yield credit isn’t the only market internal that suggests stocks are ready to rip higher.

Overall breadth has bounced hard after hitting new all-time highs. The below chart is telling us that the S&P 500 is being dragged down by big tech, but overall market breadth is getting STRONGER not weaker.

Again, this is NOT bearish. Indeed, if we go by breadth (red line in the chart below), the S&P 500 should be 100 points higher right now.

(Click on image to enlarge)

I suspect part of the reason why market internals are acting so strongly is because the market is discounting that the next President of the United States will be Donald Trump, who is obsessed with the stock market.

If you’ll recall, the former President promoted the stock market almost non-stop during his first term. Indeed, he tweeted about it an average of two times per week, mentioned it in the media dozens of times, and even pumped it higher by leaking economic developments any time it looked as if the markets would break down.

Put simply, Trump is a stock market cheerleader, and I believe the stock market is discounting a second Trump term. This will benefit certain sectors and stocks more than others. And those investors who are properly positioned stand to make potential fortunes.

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