The path to 8,000
The market has been climbing the wall of worry, choppy for a couple of days and stuck in wait-and-see mode. Even so, there is a good chance stocks push higher and the S&P 500 reaches 8,000. That target sits a little under 4% above current levels and could be hit within the next couple of weeks, maybe before Labor Day.
The move needs more help from the NASDAQ, with the NASDAQ 100 pressing near 30,000 again. The Dow industrials just hit a new high, and so did the Russell 2000. These indices are moving up on better volume. The S&P 500 and the industrials built a long base of price consolidation for about three and a half to four weeks, then broke out right after the Fed meeting and followed through to the upside.
A broader rally
The rally is broadening, which means many more stocks are taking part. When more names participate, a down day is less likely to turn into a disaster. The gains no longer come from one sector or from technology alone. Strength is showing in 3M, an industrial name; in Eli Lilly among pharmaceuticals; in Ross Stores in retail; in Cheesecake Factory, at a new all-time high; in KKR, which broke out from a solid base; and in Shark Ninja, a lesser-known name that also broke out of a base. Money is spreading into many different areas beyond technology.
Heavy call buying and sentiment
Heavy call buying is showing up in Nvidia, Meta, Microsoft, and Palantir. That tells me investors and traders are very bullish on these tech names. Palantir reported strong earnings last week and followed through higher, and buyers are still loading up on calls running from November out to January 2027. Meta had a weak response to its earnings last month but has turned around and trades near $600, with good call buying around the 650 strike. Nvidia, 3M, Eli Lilly, and Microsoft are seeing similar activity.
People are still hungry for more upside and hunting for the right names. This is much more of a stock pickers market than most people believe. Pick the best charts, the strongest names on the move, and the best money flows, and you will probably trade successfully. Eight months into the year, closer to its end than its start, the call that this would be a stock pickers market has played out in the data.
Complacency and cheap protection
The VIX sits just above 15, a bit higher today, and that points to high complacency, which is a concern. As long as the VIX stays in the low 15 to 16% range, few worry that the market can fall, and a surprise could trigger a drop. A rise to 18 or 19% in the VIX would likely mean a 200 to 300 point down move in the S&P 500. It would feel like death, but it would really just be a retest of support levels with the uptrend still intact.
Protection is cheap right now. With the VIX at 15% and realized volatility starting to come down, option prices are low. Buying put options as insurance makes sense while they are cheap. Better to hold them and not need them than to need them and not have them.
$8 trillion waiting on the sidelines
Money market funds held $8 trillion in cash at the end of July, a record. A lot of people are sitting on the sidelines, waiting for a pullback and suffering from FOMO, the fear of missing out. I would add a second acronym: DLWM, "don't leave without me." As the market keeps rising without pulling back, these people will keep throwing money in because they do not want the market to leave them behind. That turns into a self-fulfilling prophecy that pushes prices higher, which is why 8,000 on the S&P 500 looks like an easy target.
