Gains Survive Late Fade

These include the American Association of Individual Investors' (AAII) survey. When bullish sentiment spiked above 70% last month, many pundits seized upon it as proof of rampant enthusiasm among individuals. Bullishness in the AAII survey has now been below 50% for the past two weeks, coming in at 43.2% last week. Meanwhile, bearishness has risen to 31.1% vs. a shockingly low 8.6% three weeks ago. Separately, LowRisk.com reported Monday that bullishness in its sentiment index dipped to 31% from 32%, while bearishness rose to 50% from 46% the previous week.

Meanwhile, the Specialist Short Ratio -- the ratio of short selling by New York Stock Exchange specialists to total short selling -- is now down to 30% vs. its recent peak of 36% four weeks ago. Thirty percent is "a low reading and therefore bullish" as a contrarian indicator, according to RealMoney.com contributor Helene Meisler.

The anecdotal evidence includes those strategist-types who aren't "perma" bullish or bearish. To date, there's been little movement among them despite the recent advance: Those optimistic prior to the rally (long before in some cases) remain upbeat, while naysayers remain unconvinced this is anything more than an especially large countertrend rally within an ongoing bear market.

In sum, there's been no tossing in of the proverbial towel by gurus who've been on the wrong side of this move. Actually, there's rising skepticism among some of the rally's early adopters.

"I have been patiently trying to identify what could again make me friendlier to the market," wrote Rick Bensignor, chief technical strategist at Morgan Stanley.

Bensignor's last "major" call was to get more defensive as the S&P approached 973 last month. On Monday, the technician suggested a weekly close above 1001, especially on consecutive Fridays, could signal "another leg up might very well ensue," pushing the index into the 1060-90 area.

Elsewhere, Jeffrey Saut, chief equity strategist at Raymond James, expects an "upside tilt" this week, citing expectations for mostly strong corporate earnings reports and some economic cheerleading during Federal Reserve Chairman Alan Greenspan's congressional testimony Tuesday and Wednesday.

That combination should spur the Dow and S&P above their June highs and "finally confirm the Nasdaq's upside breakout," Saut forecast. "If that happens, we would sell 'em short."

Notably, the S&P 500 traded above its June 17 high of 1015.26 intraday Monday. That the index failed to sustain that breakout -- for whatever reasons -- will provide further fodder for the rally's legion of doubters.

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