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Stocks hit record highs while Comey testifies—and some say the rally will rage on

  • Stocks hit new highs Thursday as former FBI director James Comey testified before the Senate intelligence committee.
  • Some strategists say the upside won't stop here.

While many investors on Thursday were laser-focused on fired FBI Director James Comey's testimony before the Senate intelligence committee, the U.S. stock market indices rose; the Dow rose to an all-time high, and the S&P 500 was in striking distance of its all-time high.

Some say the market could be primed for a significant rally.

"What we're seeing is very consistent with healthy bull market behavior. This resiliency in the market — being able to rally through overbought conditions and all these political and geopolitical events — it's really consistent with an upcycle that we think continues," Ari Wald, Oppenheimer head of technical analysis, said late Wednesday on CNBC's "Trading Nation."

Specifically, Wald noted the S&P 500 just recently broke out above the 2,400 level, thus marking the "resumption of the bull market" as that was the index's March peak.

Now that level has become support and the region between 2,480 and 2,500 is the next stop, he said; Wald arrived at 2,480 by taking the height of the prior range and projecting it from the breakout point.

Heading into the summer months, the market may see a seasonally weak period, "but if you look a little bit closer, you usually don't see that until August, September period," Wald said.

He added: "I think it's early to make the case for a seasonal pullback; for the time being, I think the S&P continues to grind higher."

In a Thursday morning note to clients, Raymond James chief investment strategist Jeffrey Saut wrote that unless there is some kind of "headline shock" in the forthcoming trading sessions, "we think the downside is contained and that the stage is being set for another leg to the upside."

Saut acknowledged that his proprietary models were indeed "fooled" earlier this month as they called for markets to merely trade around the flatline. However, the S&P 500 surpassed his expectations and hit two new all-time highs this month. If his strategy proves wrong still, "it should prove wrong on the upside as the indices dance out to more new all-time highs."

He wrote in the same note that some investors with whom he's spoken appear not to "believe the rally, which continues to leave us in the bullish camp."

At this juncture, the market is far too complacent about political risks presented by Comey's testimony and the U.K. election, BK Asset Management managing director of foreign exchange strategy Boris Schlossberg said Wednesday on CNBC's "Trading Nation."

Of course, if President Trump emerges relatively unscathed from the testimony, such would be a bullish sign for the stock market as there would be "no prosecutable offense, at least from what he testifies to."

But if the outcome of Comey's testimony or the U.K. election goes against conventional wisdom (in other words, if Jeremy Corbyn and the Labour Party emerge victorious against the Conservative Party), Schlossberg said, "I think the political risk in the market is quite severe. The market is very overbought, very complacent, very much vulnerable to any kind of a sell-off."

Political tension will likely continue as a "cloud" over Washington, and this is a bigger problem than many people realize, wrote Miller Tabak equity strategist Matt Maley in a note to clients Thursday morning.

"Unless Comey drops a complete bomb shell … or crude oil begins to crash … the odds are pretty good that the stock markets will remain quiet until we hear from Janet Yellen next week," he wrote.

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Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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