According to the latest AAII Sentiment Survey, 49.7 percent of individual investors polled expect the market to be up over the next six months. That's the highest it has been since late August, just a couple of weeks before the market's top.
With so many bulls in the market now, could that mean the market's bounce-back is about to run out of steam and head down once again?
Chad Morganlander, portfolio manager at Stifel Nicolaus' Washington Crossing Advisors, says that part of the reason for individual investors' optimism is the hope the Federal Reserve will continue its monetary stimulus program. He doesn't think that's in the cards and that could be bad news for stocks.
"I would caution though that they (the Fed) are going to wind down their liquidity program and eventually raise rates," Morganlander said "There's going to be a tremendous amount of volatility within the market. So over the next month or two, I wouldn't be shocked to see a 5 to 7 percent downside on the S&P 500."
The technicals may be in agreement with Morganlander, according to Todd Gordon, founder of TradingAnalysis.com. While he sees the S&P 500 as remaining in a well-defined uptrend for at least the past two and a half years, the sharp drop and v-shaped reversal indicates a potential problem.
"When you start to see that kind of massive upside volatility after a downtrend has been put in place, that screams a short-covering rally," said Gordon, a CNBC contributor. "That screams shorts coming in, buying back, only to reissue those short positions. You don't see those kinds of massive up days in the course of a smooth, low-volatility uptrend."
Gordon is keeping on the 1,970 level. That is near the technically significant 61.8 percent Fibonacci retracement level (at 1,944) of the decline from the Sept. 19 highs to the Oct. 16 lows. Yet because the amount of stock advancing relative to the amount of those declining has come down, that could mean storm clouds are on the horizon for the markets.
"Eventually, buying pressure is going to give out," Gordon said. "We might go back and retest those 1,800 lows."