As the S&P 500 surged to a record close last month, retail investors cashed in high fliers such as Dell and Hewlett-Packard and snapped up securities with hefty dividend yields like General Electric, Intel, and real estate investment trusts, according to an inside look into six million funded accounts at TD Ameritrade.
The actions suggest a mild-tempered, more sophisticated approach by retail investors, who are often derogatorily referred to as the "dumb money" and thought to blindly chase momentum after stocks post big gains.
Hedge funds, on average, returned just above 3 percent in the first quarter of 2013, a brutal return compared to buyers of an S&P 500 index fund, who enjoyed a 10 percent return on their money.
Vocal activist and founder of Third Point Partners Dan Loeb was the standout, as timely bets on Yahoo, Japan and liquid natural gas play Cheniere Energy drove the firm's Ultra Fund to a 13.3 percent return through the end of March.
This bull market that seemingly won't quit is headed toward a correction this quarter, many investors said, citing recent history, the lack of retail investor participation and the upcoming earnings season.
"The second quarter has proven to be the period when the market finally provides the correction that many investors had begun to anticipate during the latter stages of the first quarter," said Brian Belski, chief investment strategist at BMO Capital Market, in a quarter-end note. "It is an appropriate time for investors to become tactically more defensive within portfolios."
Household buying power exploded by $2.3 trillion in 2012, the biggest increase since 2005, led by a surge in homeowners' equity, according to a report by Deutsche Bank.
The firm calculates the metric by adding household cash flow (income minus taxes), home equity and consumer credit. It uses the recently released data in the Federal Reserve's fourth quarter Flow of Funds report.
"At minimum it should underpin the gains in consumer spending we are projecting in the quarters ahead," said Joe LaVorgna, Deutsche's chief U.S. economist. "If the labor market builds upon its recent momentum, this will further lift demand for housing, thereby pushing home prices and household buying power even higher."
Homeowner's equity made up the bulk of the fatter wallet consumers may be feeling today, jumping a whopping $1.6 trillion. Household cash flow was up a net $603 billion, according to Deutsche, and consumer credit added another $42 billion to buying power.
The report said it calculates "buying power" this way because "households can consume through current cash flow or they can borrow" using credit cards or home equity lines of credit.
The most popular way to measure market fear — the CBOE Volatility Index — fell to its lowest point of the four-year bull market, signaling to many traders a level of complacency that sets in before a powerful drop in stocks.
"The next few weeks or months could be treacherous for shorts, but the odds favor a volatility spike of fairly epic proportions off of what is a very depressed level," said Dan Nathan, co-founder of RiskReversal.com. "I think you would have to have your head checked to load up on equities here."
The bull market's latest run, which sent the Dow Jones Industrial Average soaring past its 2007 record high, may have some cheering but traders say some of the stocks leading it are riskier bets, a sign that a pullback could be ahead.
"It used to be a joke on trading desks that when the mortgage insurers started rallying, the markets were ready to turn lower," said Enis Taner, global marcro editor for RiskReversal.com. "They're the real long-term trash."
One of the longest and most powerful equity bull markets in history turns 4 years old today. And traders believe there is just one man to thank: Federal Reserve Chairman Ben Bernanke.
At 1,461 days and counting, it's the eighth longest bull market since 1928, using data from Bespoke Investment Group. And if the S&P 500 climbs another 3 percent to surpass its 2007 high, the 136 percent total price increase will make it the fifth greatest bull market during that same time frame.
"I think Bernanke has sort of carried the load himself during this period," remarked investing legend Warren Buffett in an interview with CNBC this week. "Cheap money makes things happen."
(Read More: Buffett Still Buying Stocks, Sees 'Good Value')
Retail investors fully embraced this bull market in February, looking past any threat from the sequester crisis in Washington, D.C., and buying stocks more aggressively than they have in three years, according to a sentiment index from TD Ameritrade.
(Read More: CNBC Explains Sequester)
They looked for the stocks that would lead the next leg of this bull market, buying into underperforming names such as Apple, Facebook and Intel, according to the survey that tracks the behavior of the largest pool of retail investors.
What do a $3.80 gasoline price, a 2.15 percent 10-year Treasury yield and a 20 reading on the CBOE Volatility Index have in common? They're all levels that could ring the bell on this rally.
Gas prices have been chugging higher for the past month, with the current national average at $3.78, according to AAA. That's just two cents from the magic $3.80 and a traditionally dangerous level for the stock market, according to Barry Knapp of Barclays and other strategists.
(Read More: Pro: Gas Won't Hit $5 This Year)
In fact, Knapp has a chart in one of his latest strategy reports that shows $3.80 a gallon for gas has historically been where the forward multiple of the S&P 500 index tops out. In other words, investors start paying less for future earnings in anticipation higher gas prices will hit company profits.
"A rise in gasoline was followed by a deceleration in consumption in the following quarter" in February 2011 and 2012, Knapp said in a note to clients.
(Read More: Strike Three! The US Consumer Is Out)
Meanwhile, ten-year Treasury yields have jumped to around 2 percent this year amid concern that the Federal Reserve may end its quantitative easing plan sooner than planned. If this yield hits 2.15 percent — the average dividend yield for stocks in the S&P 500 — bonds suddenly look very attractive again to income seekers who have flooded into stocks.
"The fact that stocks have been yielding more than the 10-year has been a major argument in favor of equities over the past nine months or so," the strategists at Bespoke Investment Group wrote in a note pointing out these metrics colliding toward each other.
Why take the risk of owning a stock for its yield, when you can get the same comfort without that risk in a Treasury security?
(Read More: Pullback? Pfff. These Pros Say 'Buy!')
The last number — the VIX — was thrust into the equation today as the so-called fear gauge jumped more than 20 percent to above the 19 level. The metric measures the price of puts (market protection) to the price of calls on the S&P 500.
A rise above 20 in the VIX in April 2012 and July 2011 signaled a jump in investor fear and presaged pullbacks in the market.
"If we got above 20 and held it for a couple days, then market would go a lot lower," predicted Jon Najarian of TradeMonster.com.
And the winner for craziest stock of the year is ... Blackberry. The formerly-named Research-In-Motion trades, on average, 5 percent in either direction on any given day this year as traders, investors and Wall Street analysts guess whether their new phone will be a success or not.
(Read More: Samsung's New Phone Will Debut on Apple's Turf)