A contrary indicator suggests the market's win streak is just beginning, Wall Street bull Ed Yardeni says

The market's win streak may be just beginning.

Edward Yardeni, who spent decades on Wall Street running investment strategy for firms such as Prudential and Deutsche Bank, predicts stocks will break out to all-time highs this year.

He's partly building his bull case based on a chart pointing to negative market sentiment.

"At the end of last year the bull-bear ratio, which is something we watch from Investors Intelligence, fell below one," the Yardeni Research president told CNBC's "Trading Nation" on Friday. "It's got an awfully good track record as a contrary indicator."

Each time the index last year spiked to either record or near record highs, Yardeni found the S&P 500 Index entered correction territory. It appears an opposite trend is unfolding right now.

"Bearishness was just so widespread that the market had a technical bounce, and now the fundamentals are going the right way," added Yardeni.

It's a scenario he predicted on "Trading Nation" on Dec. 26 as stocks were staging a historic rebound from the Christmas Eve meltdown. According to Yardeni, investors were too pessimistic about a recession, the Federal Reserve's interest rate policy and the U.S.-China trade war.

"A lot of these things seem to be coming around in the right direction here, and so the markets have done extremely well," he said.

The S&P 500 closed out the third week of January out of correction. The index now on its longest win streak since August — up four weeks in a row on signs U.S.-China trade tensions may be abating and encouraging fourth quarter earnings reports.

Yardeni said those factors are ultimately driving a year-long powerful market rebound. He predicted the S&P 500 will be 15 percent higher from current levels by year's end.

"I'm still sticking with 3100 and feel better about it," said Yardeni, who noted valuation multiples, low interest rates and inflation is setting Wall Street up for a very good year.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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