With market complacency and optimism both nearing levels unseen since before the financial crisis, the market either has A) put the damage of the past two and a half years behind it, or B) is setting up for a fall.
While the prevailing current in the market is towards "A," swelling commodity prices are putting "B" into play, particularly if energy prices continue their relentless move higher.
"The 2008 and 2009 era of financial crisis is pretty much behind us. Most investors would agree with that," says Andrew Wilkinson, senior strategist at Interactive Brokers. "What's overhanging the market now is this great big question mark over commodities. It has hung over the market like the sword of Damocles."
Despite a healthy rally Friday, stocks have done virtually nothing for the past seven weeks. The 1,315 level for the Standard & Poor's 500 on Feb. 22 looked a lot like the 1,314 where the broad gauge opened Friday.
Early earnings reports have had little effect overall, despite some significant disappointments from big banks and Google.
But in other ways, the market looks a lot like the one just before stocks started coming off their record highs in October 2007, a decline that would accelerate as some of Wall Street's most venerable financial giants began vanishing into the dust of the subprime mortgage debacle.
At that point, market complacency as measured through the CBOE Volatility Index was at anemic levels, in fact just below where the VIX sits now.
The difference between bullish and bearish investors then was canyonesque, in the 40 percent range, much like the most recent Investors Intelligence survey indicates. The survey, which measures the sentiment of professional investors, most recently showed bulls at 55.4 percent to just 16.3 percent bears, a spread of 39.1 points, levels not seen since the pre-crisis days.
"It's definitely getting overbaked. I always view things like that as a contrarian signal," says Dave Lutz, managing director of trading for Stifel Nicolaus in Baltimore. "The complacency is definitely out there. Everyone keeps pointing to the S&P going down and the VIX down the last couple of sessions. I would agree that's an issue, but for some reason now I'm very bullish."
The likely continuation of lax Fed policy will keep a floor under the markets, distinguishing it from other parts of the world where central banks are acting to take control of inflation threats, he adds.
Lutz has plenty of company, despite the plethora of headwindsthat have buffeted the market over the past two months.
From the natural disaster in Japan to European debt concerns to dour housing numbers, plus ongoing turmoil in the Mideast, there is plenty room for concern.
Yet the market continues to shake off the bad news, behavior irrational enough that it even is starting to worry those with an otherwise bullish outlook.
"[O]nce the initial shock wears off, new news is becoming old news very quickly," Randy Frederick, director of trading and derivatives at Charles Schwab, said in a note to clients Friday. "With a couple of less than stellar responses to a few big earnings reports already, monetary tightening in China, a couple of economic reports that have missed the mark a bit and a sprinkle of new debt concerns in Europe, we have a climate for a very uncertain market; not necessarily bearish, just uncertain."
Frederick advised investors to use some hedging strategies, such as cash-secured equity puts, to protect their portfolios.
Such protection would become vital should the market finally recoil against the commodities surge, particularly in energy prices, that could hamper both consumers and corporations.
"The S&P is consolidating here, and it also seems crude is consolidating," Lutz says. "If crude breaks north we could have a big problem. That's one of the black swans I'd be looking at."
Though the averages haven't taken much of a hit, retail investors certainly have been recoiling from the markets.
After a healthy two-month streak to start 2011 that gave equity mutual funds their best inflow run in more than a decade, mom-and-pop investors have pulled $8.5 billion out of US equity funds in the past six weeks, according to the Investment Company Institute.
A separate gauge of sentiment, from the American Association of Individual Investors, shows the bear-bull split much closer, with 42.2 percent bulls and 31 percent bears, nearer to historical norms than in recent months.
By the contrary measure of smaller investors, then, the bull run actually could have some legs, despite the commodities boom.
"No bull market has ever peaked without the retail crowd head over heels in love with stocks," says Ryan Detrick, senior analyst at Schaeffer's Investment Research in Cincinnati. "April has been strong historically. But then we have 'sell in May and go away.' We're entering a historically neutral to bearish time frame. So by nature the markets kind of dull and boring."