Market bears still waiting for pullback

That hibernating bear may look cute now, but some experts think investors have to start worrying about it waking up soon.

The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

Stocks dipped a bit on Thursday, but this hardly looks like the beginning of a massive market correction.

People often describe the market as being ruled by two emotions: fear and greed. In fact, that's why we created our own CNNMoney Fear & Greed Index to track market sentiment. The index is currently in Greed mode, with three of the seven indicators showing Extreme Greed levels.

But here's the thing. I think investors are actually afraid. They're scared of missing out on the next leg of this bull market.

Many market experts I talk to have noted that stocks may be grinding higher not because of any real sense of excitement, it's simply that investors aren't selling. Some call the phenomenon a "melt-up."

Barry Ritholtz, the always quotable CEO of research firm Fusion IQ, wrote in a blog post this week that the giddiness you often see when the market is in record territory is absent this time around. Ritholtz, who is a must-follow on Twitter (@Ritholtz), titled his piece "Exuberance? Euphoria? Hardly . . ."

This isn't 1999 or early 2000, he noted, when everyone and their grandmother (and their grandmother's hair stylist) was trying to find the next dot-com IPO to soar. Heck, it's not even 2007, when the Dow and S&P 500 last hit their peaks before this year.

And for that reason, he thinks that stocks could continue to go higher.

Related: What's next for the markets? Special coverage from CNNMoney

The S&P 500 is trading at the reasonable, although not dirt-cheap, level of 15 times 2013 earnings estimates. Many investors are still flocking to the perceived safety of bonds over stocks. So it's hard to say that Dow 15,000 is as "irrationally exuberant" as Dow 6,400 was in December 1996, when then Federal Reserve chairman Alan Greenspan first uttered his famous phrase about stocks. Ritholtz wrote that this is "the most hated rally in market history."

In a quick phone chat, Ritholtz added that there are many investors, both average individuals and larger institutions like hedge funds, who have refused to believe the rally is for real. They've been sitting in cash. If stocks keep moving higher, they may have no choice but to jump in with both feet.

But there are still skeptics who think the market is due to cool off, at the very least, if not necessarily implode.

"We may soon be getting to a point of buyer exhaustion," said Mike O'Rourke, chief market strategist with JonesTrading, an institutional brokerage firm. "At a minimum, even if there were no risks, a healthy market reaction after a rally like this would be for stocks to correct and go sideways for a bit."

O'Rourke thinks stocks aren't going up for the right reasons. He believes that the Fed and other central banks around the world are fueling the rally with low interest rates and other stimulative programs such as big asset purchases.

He adds that many companies are engaging in what he calls "financial engineering," increasing dividends and boosting share buyback programs to attract buyers instead of investing in new employees and new equipment, the types of things that will lead to longer-term sales and earnings growth.

Those are fair points. Corporate profit reports for the first quarter have been somewhat underwhelming and many leading companies are still giving cautious outlooks.

The labor market may be getting better but it's nowhere near as healthy as it was just before the start of the Great Recession. And the U.S. economy overall is still growing at a pace that's below what we'd normally expect this long after a downturn. I've been calling this low-and-slow comeback the barbecue recovery for several years now. I look forward to the day when I can retire the phrase. We're not there yet.

With the Fed showing time and time again that it will not pull back on its stimulus until there are clear signs the economy is on more solid footing, it's hard to bet against stocks. Bond yields are still too low to make them more viable investing alternatives.

Related: Waiting for the bond bubble to pop

Stocks can't continue to climb at this breakneck pace indefinitely, though. The Dow is not going to pull a Buzz Lightyear and go to infinity and beyond.

It's probably not a good idea to try and pinpoint the exact moment when stocks peak and a correction or new bear market begins. But Daniel Alpert, managing director with investment bank Westwood Capital, thinks we are getting closer to the top.

Alpert, another good follow on Twitter (@DanielAlpert), says investors may soon feel like cartoon character Wile E. Coyote. They may find themselves standing on thin air with nothing but a huge canyon below them. In other words, enjoy the rally while it lasts. The drop could be a doozy.

"Cash is being forced into the market. Treasuries are uninteresting to people. It's 'greater fool' investing," said Alpert. "This will continue until it stops."