S&P Pauses at the Heights

When "Who's your broker?" becomes a more common cocktail party conversation opener than, "Can you believe Murdoch wants to buy Dow Jones (DJ Quote)?" then it's time to worry about sentiment getting too bubbly.

Only when investors stop marveling at other people's deals and start turning to their own stock picks will it be clear they have stopped "doubting this rally" and have gone all-in, says Tobias Levkovich, chief equity strategist at Citigroup.

For now, "reluctance will breed gains," he says. Even as the S&P 500 bounced against its record closing high Monday, many investors remain wary of the stock market's rally. Their skepticism suggests there's probably still room to go.

The S&P 500 spent much of the afternoon north of its record closing high of 1527.46 hit on March 24, 2000. But the broad market index closed off its intraday best, ending up 0.2% to close at 1525.10.

The Nasdaq Composite closed up 0.8% at 2578.79 Monday thanks to strength in big-cap tech names like Amazon.com (AMZN Quote) and Apple (AAPL Quote).

Meanwhile, the Dow Jones Industrial Average finished down 0.1% to close at 13,542.88, pressured by more than 1% declines in Alcoa(AA Quote), AT&T(T Quote), and Coca Cola(KO Quote).

The reluctance and disbelief comes from retail investors who continue to park their earnings in overseas investments rather than U.S. stocks. Institutional investors, meanwhile, lack conviction and are being sucked into the market after being frustrated and tired of waiting for a pullback.