Stock leadership is shifting, and investors should become underweight defensive sectors and income investments, while overweighting industrials and technology, advises Bob Doll, chief equity strategist at Nuveen Asset Management.

The Standard & Poor's 500 is currently trading at approximately 16 times trailing earnings, which Doll said is only slightly above the historical average.

The bulk of the stock market's bullish performance in the past four years has been due to higher earnings, not government stimulus, he claimed.

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

"We believe valuation will not constrain prices, but a positive view on the market depends on the uptrend in earnings resuming," he wrote in his weekly commentary.

Doll will be watching top-line revenues carefully as second-quarter earnings results continue to unfold. As of Monday, more than 70 percent of the S&P 500 companies that had reported had exceeded consensus earnings per share estimates by about 3 percent in the aggregate, he noted.

The Federal Reserve does not intend to raise rates for a few years, and tapering of quantitative easing depends on how strong the economy gets, Doll predicted.

While U.S. retailed sales missed expectations in June, Doll said they are still beating 2012's performance, and leading indicators look positive.

"The recent rise in oil prices should not be a significant drag on global growth," he stated.

Moreover, the federal deficit is shrinking, tax receipts are up and government spending is down. "A budget surplus in a couple of years is not out of the question," said an optimistic Doll.

Equity sector leadership is shifting because of an increase in bond yields and improving economic expectations, Doll wrote.

"As a result, we believe investors should consider underweighting defensive sectors and bond-like investments, while overweighting mid-cyclicals such as industrials and technology… Perhaps the 'great rotation' has begun."

Veteran technical analyst Ralph Acampora, director of the New York Institute of Finance, also issued a positive call on the stock market Tuesday. "Earnings continue to impact stock prices: expect some choppiness, but the overall market bias is still up. Buy!" he wrote on Twitter.

In a column for MarketWatch, trader and author Lawrence McMillan wrote that overbought market conditions are mounting, but that he still expected higher prices.

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation