After another week of strong gains for stocks, the fear of missing out could drive this bull market even higher.

Last week, the Dow Jones Industrial Average climbed 368.58 points, or 1.6%, to 22,773.67, its fourth consecutive week of gains. The Nasdaq Composite gained 1.5% to 6590.18, a record high, while the Standard & Poor’s 500 index rose to 2549.33.

And what well-earned gains they were. Early last week, the Institute for Supply Management’s manufacturing index hit 60.8, its highest level since 2004. That was followed by better-than-expected jobless claims and durable goods orders on Thursday. Even Friday’s weaker-than-expected payrolls report could be explained away due to the hurricanes that hammered the country during September. Looking ahead to next week, September’s consumer-price-index data could provide more evidence of a not-too-hot, not-too-cold economy.

“Generally, fundamentals look good,” says Greg Woodard, portfolio strategist at Manning & Napier. “We expect the expansion to continue at slow rate.”

Speaking of slow: The S&P 500 has now gone 332 days without a 5% drop, second only to the 333-day rally that began on Nov. 23, 1994, notes William O’Neil strategist Randy Watts. (Yes, that means that if we make it through Tuesday without a selloff, it will be the longest such streak on record.)

The rate of the change, however, has been downright snail-like, with the market rising about 33%, or just under 0.1% a day, over the course of the rally. During the rally that began in 1994, the market gained about 58%, or 0.17% a day. “It’s rare to go this long without a correction,” Watts says. “But the economic recovery has been more muted than in the past.”

Even so, are investors getting too complacent? Bank of America Merrill Lynch’s sell-side indicator, which tracks optimism among Wall Street strategists, remained at 55.4 in September, near its highest level since 2011. Using a 15-year average, that’s nothing to worry about—the market has been higher 12 months later 61% of the time following such readings. But switch to a four-year time average and it’s more worrisome, with a drop occurring 49% of the time. “Sentiment levels are now at relative levels that have historically indicated weak returns over the next 12 months,” says Merrill Lynch strategist Savita Subramanian.

But that’s so 12-months-from-now. Wellington Shields technical analyst Frank Gretz points out that bull markets generally see a “blowoff” move from at least one market sector before all is said and done. He points to 2007 and the rally in oil stocks—the energy sector gained 32% that year as the market was topping—and I’d add the tech sector’s 78% rise in 1999.

(Source: Barrons Online)