Earnings season is underway after Citigroup, J.P. Morgan and Wells Fargo reported on their recent quarters.
But, the S&P 500 enters the reporting stretch with sky-high valuations.
The broad-based index is trading at more than 18 times forward earnings, its highest valuation since January 2018. That marked a peak that preceded a tumble into a correction.
Underlying factors lead Ari Wald, head of technical analysis at Oppenheimer, to believe this time could be different.
"It's important to stress that relative valuations, specifically stocks, are trading cheaper to where bonds are versus at that point. The 10-year Treasury yield is at about 1.8% now — 2.7% in January 2018. So this idea that there is no alternative, I think is a tail wind for stocks and why we're not at risk for that same sort of downturn," Wald said Tuesday on CNBC's "Trading Nation."
Wald adds that one under-the-radar chart gives him even more confidence that stocks should continue to move higher here – the percentage of stocks in the All Country World Index above their 200-day moving average.
The number is "above 70% right now which historically has been followed by above-average returns over the next six to 12 months. Stocks do better when there's more stocks participating and that's the case right now," he said.
Boris Schlossberg, managing director of FX strategy at BK Asset Management, said another indicator gives him pause, though he remains generally bullish.
"Savvy investors should actually look at price-to-sales ratios and price-to-sales ratios are actually at the highest level since 2000," Schlossberg said during the same segment. "We could have a 'Roadrunner moment' sometime this year where basically investors realize that earnings are just not there, and we could hit a pretty strong air pocket. Therefore, I definitely think some hedges are due."
The S&P 500 hit a record on Tuesday for the second day in a row.
