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Inflation data came in hotter than expected this week — not exactly a bullish development — yet stocks are pushing higher.
The market just doesn’t care.
The S&P 500 is hovering at all-time highs, and traders are trying to figure out if this is the real breakout or just another head fake before a pullback.
But here’s the kicker…
Despite being just a couple of percentage points away from record levels, investor sentiment is extremely bearish. The latest AAII sentiment survey shows the highest level of bearishness in over a year.
Typically, that kind of extreme negativity shows up when markets are at lows, not when they’re knocking on the door of fresh highs.
That’s the definition of climbing the wall of worry.
A Contrarian Buy Signal?
Historically, extreme bearish sentiment can be a sign that the market still has room to run. When investors are this skeptical, it often means a lot of them are still on the sidelines — or even short — waiting for the next big drop.
If the market keeps moving higher, those traders eventually have to buy in, fueling even more upside.
It’s the same pattern we’ve seen play out over and over again. Fear dominates, people hesitate to buy, and then stocks grind higher anyway. At some point, that fear flips into FOMO, and before you know it, the market’s up another 5% to 10%.
Does that mean this rally is unstoppable? No. But it does suggest that as long as price keeps confirming the move higher, there’s no reason to fight it.
The Key Level to Watch
The big test comes down to how the market handles the highs. If we get a clean breakout and a sustained close above resistance, this bull market likely has more room to run.
But if we see a push higher followed by an immediate reversal — a fakeout — then we could be looking at a setup for a deeper pullback.
The Nasdaq 100 (QQQ) isn’t quite at all-time highs yet, but it’s getting close. The Dow is still lagging, and the Russell 2000 is nowhere near its previous peak. But even with those gaps, the major indexes continue to show resilience.
And as long as sentiment remains this skeptical, the path of least resistance may still be higher.
This is the battle playing out right now…
Bearish traders looking for the next big drop vs. a market that refuses to roll over.
One side will be proven wrong soon. But if history is any guide, betting against a market climbing the wall of worry usually isn’t a winning trade.
I’ll see you in the markets.
Chris Pulver
Chris Pulver Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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