While the market’s new obsession is the debt ceiling, the reality is that it’s the opening act for what’s really happening in the market.  However, even opening acts can stunt the otherwise amazing performance of the main attraction.  

We’re stuck in gridlock for the time being, held captive by the Fed and by the US Government.  The market rallied and cleared the pivotal 4200 level once a debt ceiling debt was believed to be nearly completed.  And then politicians had to get political and stocks tumbled.

I can’t tell you what the market thinks will happen, but my take is that a debt ceiling deal is likely to happen at the 11th hour, or at a minimum they will agree to tackle the issue months from now.

If that happens, the short sellers could be squeezed out of the market and we could easily see a rally to 4350, 4600, or 4800.  I’ve included a chart of the S&P 500 ETF (SPY) which is 1/10 of the index, so on this chart the potential profit levels of 435, 460, and 480.

I know, you’re probably thinking that there’s no way the market can be that bullish after the smoke clears from the debt ceiling talks. I don’t need to run down all the fundamentally bearish things impacting the market – you know them by now.

But, that’s where our headline comes in. Did you happen to see the Nasdaq 100 made a new 52-week high this week? Here’s a weekly chart of the QQQ.

The Nasdaq 100 has consistently shown a trend: when it reaches a new 52-week high after a six-month period without achieving such a high, it has closed higher 12 months later in all 14 instances.

While this pattern has been reliable so far, there’s always a possibility that it may not hold true this time. It could either be an exception, breaking the streak, or it could continue the pattern and make it 15 for 15.

I’m counting on it being the latter.

Since I mentioned the Nasdaq 100, let’s take a look at one of the stocks that are likely to push the index higher once the debt ceiling is figured out.

Alphabet (GOOG/L) is responsible for about 8% of the Nasdaq 100 price movement. So if the tech stocks are likely to move higher, you have to put GOOG/L on your watchlist.

I see the stock pulling back down to the $118 – $121 level, before taking off higher to $130 and then possibly $135.

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