No matter how many warning signs emerge, people always seem to find new ways to believe that the good times can last forever. Right now, the rules of the game in the US stock market are as clear as day: the S&P 500 is hitting record highs, boosted by a rally that has added $16 trillion in market cap since the start of 2025. Oil prices are near four-year lows, while risk is abundant everywhere — from equities to crypto. Expected volatility is at a one-year low. Investors keep buying at the top, and it's almost impossible to tell which high will actually be the last.

In the 1990s, it was the Internet that propelled American stocks. In 2021, it was zero interest rates. Today, it's the age of artificial intelligence. Wall Street has convinced itself there's no such thing as "too much optimism" — at least for now. The Fed is expected to continue cutting rates, AI technologies are here to stay, and that means corporate profits and the US economy still have room to expand. So does the S&P 500.

Divergence between Dow Industrials and transport companies

Never mind the old Dow Theory flashing warning signals. According to it, when industrial stocks rally without confirmation from transportation stocks, trouble is brewing. The gap between the two hasn't been this wide since the global financial crisis of 2008–2009, the 2020 pandemic, and the tariff shock earlier this year. The number of "bears" has exceeded the number of "bulls" for seven straight weeks — something that's only happened three times since the beginning of the 20th century.

Still, the market hears only what it wants to hear. Instead of scary headlines, investors are latching onto a recent Bank of America report suggesting there's no bubble in the broad equity index. Historically, during the last ten market bubbles, the average rally from bottom to top was about 244%. Today, the so-called "Magnificent Seven" are up 223%. Back then, the average price-to-earnings ratio was 58, and the distance from the 200-day moving average was 29%. Today, those numbers are 39 and 20%, respectively. The S&P 500 still has room to climb.

Bull vs. bear sentiment in US stocks

What could stop the bulls in the broad market index? A sharp reassessment of Fed rate expectations? Judging by what's happening in the currency markets — where the US dollar is strengthening — that reassessment is already underway. But equities remain unfazed. Accelerating US inflation? Possible, but unlikely. The Federal Reserve has made it clear it's more concerned about unemployment. Strong labor market data? Also unlikely to change the narrative.

Technically, on the daily chart, the S&P 500 is now within arm's reach of the previously stated target level of 6,700. A breakout above resistance would pave the way toward 6,850 and beyond. In this environment, it makes sense to stick with the classic "buy the dip" strategy or go long on fresh all-time highs. Key support is seen near the 6,570 mark.