Stocks are at record highs, but the abundance of bulls running through Wall Street could signal that is might be time to get bearish.
In its latest report on advisor sentiment, Investors Intelligence noted that just 13.3 percent of newsletters it tracks were bearish, the lowest level since 1987, or just before the crash of Black Monday.
This bullishness, or lack of bearishness, comes amid the backdrop of an historic rally that is putting up Ruthian numbers for the longest stretch without a significant pullback. In fact, one has to go back to October of 2011 - nearly 1,066 days - since the market registered an official correction, according to statistics gathered by CNBC.com. That’s the longest stretch without a pullback of 10 percent or more since 2007.
Even more incredible is that fact that there have been only two bullish stretches longer than the current bull market in the last quarter of a century: 1990 – 1997 and 2003 – 2007.
Equity Group Investments’ Sam Zell is starting to sweat. “People have no place else to put their money, and the stock market is getting more than its share,” he said to CNBC’s “Squawk Box” on Wednesday. “It’s very likely something has to give here.”
However, Erin Gibbs, equity chief investment officer at S&P Capital IQ Global Markets Intelligence, doesn’t think it’s time to worry just yet.
“Corporate earnings and revenues are at all-time highs with solid growth on the horizon,” said Gibbs, who advises over $12 billion in assets. “Also valuations have come down from peaks levels of 16.3 times forward earnings.”
Though Gibbs notes that the S&P 500 is still trading near the top of that range, “we’re nowhere near frothy.”
Nonetheless, Gibbs believes there is some rockiness ahead. “We expect some increased volatility in the coming 12 months as the Fed raises rates,” she said. “The S&P 500 typically contracts around 8 percent when inflation first rears its head. So when we cross that point, we could see a sustained pullback but long term, we have solid fundamentals.”
Jason Rotman, managing partner at Lido Isle Advisors, agrees with Gibbs’ assessment that the market isn’t at a peak just yet.
“We’re not frothy,” he said. “We’re actually in the middle of the road.”
Rotman bases his outlook on the S&P 500’s relative strength index (RSI), a technical indicator that measures momentum. The RSI is a function of the number of up days versus the number of down days. An RSI above 70 indicates overbought conditions. Using a 14-day time frame, the S&P 500’s RSI is currently around 67.
“Interestingly enough, even though the S&P  is at all-time highs, the RSI has not broken the previous highs of the summer of 2014,” said Rotman, who has a 2,055 price target on the index. “I still think we have room to run technically.”
To see the full discussion on the S&P 500, with Gibbs on the fundamentals and Rotman on the technicals, watch the above video.
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