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Something miraculous just happened, and it could boost stocks 20%: Canaccord

One of Wall Street’s biggest bulls says stocks could skyrocket as much as 20 percent over the coming months due to an unusual event, one that has only been seen twice in the last 65 years until now.

Here’s what happened: On June 28 and June 29, 90 percent of the New York Stock Exchange (NYSE) volume was positive. Canaccord Genuity chief investment strategist Tony Dwyer said the combination of historical precedent and fundamental backdrop suggests a 15 to 20 percent upside over the next 6-12 months.

It may sound technical, but according to Dwyer, the conviction on the part of market participants can often indicate future rallies. Certainly, the market appears headed in that direction already: Last week, stocks all but fully recovered from their Brexit knee-jerk selling, with the broad S&P 500 Index logging its biggest weekly gain since October 2014.

“If you go back to look at 1950 on just occurrences, when you had two upside 90 percent days you have never been negative three, six and twelve months later. As a matter of fact, your median gains are 12 percent, 18 and a half percent, and 29.2 percent,” Dwyer recently told CNBC’s “Futures Now.”

He crunched the numbers with help from data gathered by SentimentTrader.com’s Jason Goepfertat.
When ‘conservative’ means an S&P target over 2300

Last week, Bank of America’s Sell Side Indicator noted that Wall Street’s bullishness on stocks had fallen for a third month in a row. In the bank’s view, the decline in sentiment is a counter-indicator that is flashing a “buy” signal for investors.

For his part, Canaccord’s Dwyer, who has a 2,175 year-end price target on the S&P, sees even bigger gains next year. His 2017 price target on the index is 2,340, a prediction which he calls conservative.

“I’m probably too low on that,” said Dwyer. “The most important point is that corporate credit has improved. If you look at one of the things which is really going to freak out investors, it’s when the stock market recovers and corporate credit doesn’t.”

For investors looking for value, he believes financials, which were hit hard by the June 23 Brexit decision, are positioned to grab significant gains—especially with the Federal Reserve on hold for the foreseeable future.

“It’s fantastic. It’s Wall Street lore. The Fed is not going to move, they are going to be lower for longer, the yield curve if flattening, how could you possibly want to buy a financial or a bank when there is European crisis and Asia is slowing?” argued Dwyer.

He compares the current situation to 2012 when the European sovereign debt crisis was unfolding. If Dwyer is right, it could be a very profitable period for financial stocks.

“The data is very clear. The market is up every time after you get this kind of buying thrust that we’ve had” over last week, he said. “And, the last time that you had a similar environment of low interest rates, flat yield curve, European crisis…. that was the time to buy the banks,” said Dwyer.

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