One technical analyst says we are no doubt in a bull market — and sees further gains ahead, eyeing several key charts.
Piper Jaffray senior technical analyst and managing director Craig Johnson on "Trading Nation" Monday addressed the market while discussing a new report from Bank of America Merrill Lynch that suggested investors should favor buying the most underowned stocks.
"This thesis does seem to make some sense, but it works in a market that's sideways consolidating, and right now we're in a bull market, and we think there's going to be more upside ahead," Johnson said.
Several factors contribute to Johnson's optimistic outlook, including the dollar and financial stocks.
"The U.S. Dollar Index appears to have confirmed support at the lower end of a multiyear consolidation range; we suspect a return back to the 200-day moving average is now unfolding; we suspect more near-term strength lies ahead," Johnson wrote in a Monday note to CNBC, citing a dollar index chart with a 200-day moving average showing year-over-year gains.
When it comes to the financial sector, Johnson wrote in the note that he sees an "interesting downtrend reversal underpinned by a move higher in yields," and suspects another "leg higher" is underway.
Looking at the utilities ETF, the XLU, another factor that Johnson sees at play here, though an area that may suffer in the short term, he notes the sector "appears to be engaging in a deeper pullback after recently violating an uptrend support line."
Johnson suggests reducing positions.
"So, I'm not sure how long this particular trade is going to last," Johnson said on "Trading Nation," referring to the Bank of America Merrill Lynch report on overowned and underowned stocks.
"I want to just be long this market and long good, solid equities."