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Gathering market forces signal new highs: Bespoke

A perfect storm of bullish stock market trends should push the S&P 500 into record territory soon, Bespoke Investment Group co-founder Paul Hickey said Tuesday.

Valuations, while above average, have been moving sideways, but earnings appear ready to play catch up as the year progresses, Hickey told CNBC's "Squawk Box." He also cited as a positive force, the 45 percent jump in U.S. oil prices since the Feb. 11 bottom.

The Federal Reserve poured fuel on the market rally in March, when policymakers cut in half their projections for 2016 interest rates hikes from four to two, he said. "Janet Yellen, the only thing she hasn't done is say, 'Go out and buy stocks.'"

The Fed raised rates for the first time in more than nine years in December.

"These things underneath the market are breaking out. And we think the market overall will also make a new high here. It's all within 2 percent at these levels," Hickey said.

As of Monday's close, the S&P 500 was 1.74 percent away from a new high. The index closed at a record of 2,130.82 in May. The Dow Jones industrial average closed Monday above 18,000 for the first time since July 20.

In a note to investors, Bespoke said the S&P's cumulative advance/decline line — the sum of the daily number of advancing stocks minus decliners in the index since the bull market began in 2009 — has already hit a new high. "This suggests that the underlying health of the S&P is actually stronger than what the index's price is telling us," Bespoke said.

Another historical factor that favors the bulls, perhaps counterintuitively, was the reduction in profit forecasts ahead of the first-quarter earnings season, which is currently ramping up.

"Historically, when you see ... analysts cutting forecasts at a greater rate than they're raising forecasts heading into earnings season, 85 percent of the time the market raises during earnings season," he said.

As of Monday, about 8 percent of S&P 500 companies have reported earnings for the first three months of the year. Seventy-one percent have beat lowered Wall Street expectations.

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