The news is getting louder by the day, and it’s driving most investors insane.

The combination of a busy earnings season, the sheer speed of the rollout of Trump’s political agenda, and a few crazy stock rallies have turned the herd into an emotional wreck.

Simply put, no one knows what to make of this market.

We’re seeing a record-setting surge in retail trading, according to a JP Morgan report via MarketWatch.

“Retail traders bought $3.2 billion in shares of individual stocks on a net basis earlier on Tuesday,” the report states, noting a short list of mega-cap stocks making up a whopping 70% of the trading activity.

The so-called “dumb money” has fallen hard for high-flying winners like Palantir (PLTR) and its 25% overnight earnings rally. And let’s not forget Meta (META), which just logged a 14-trading day win streak.

These moves are probably enough to convince even a casual market watcher that it’s getting a little too frothy out there.

But the sentiment picture isn’t as cut and dry as you might think.

Just look at the latest AAII Investor Sentiment Survey. According to AAII, pessimism is actually rising among individual investors. Bearish increased from 34% to almost 43% week over week. This is also the highest bearish sentiment reading since Nov. 2023, when it briefly cracked 50%.

Who’s right, the bulls or the bears?

To find out, we need to cut through the noise with some key charts and data.

Let’s get to it…

An Earnings Season Surprise

According to FactSet Senior Earnings Analyst John Butters, stocks delivering positive EPS surprises for Q4 have received an unusually large boost by traders despite a run-of-the-mill earnings season. PLTR and META are excellent examples.

Of course, we’ve also had our fair share of headline misses…

After reporting softer-than-expected earnings Monday night, the market promptly slashed Alphabet (GOOG) and Advanced Micro Devices (AMD) share prices.

However, sellers are attacking the EPS losers with a lighter touch this season. So far, companies are trading 2.2% lower two days following a negative earnings surprise versus the five-year average of 2.3%.

Immediately, my mind turns to the “BTFD” retail trade. Butters, on the other hand, suggests the root cause could be the above-average number of S&P 500 companies providing positive forward guidance. He may be right.

Regardless, investors are buying the dip hand over fist. And they’re laying off the “sell the news” trade despite the incessant bearish news cycle.

Perhaps earnings reactions are just another indication of the overzealous buying of ill-informed Main Street.

I think the supposed “dumb money” is simply following the trend instead of the noise…

Don’t Dismiss All-time Highs

Check out the S&P 500’s (SPY) trajectory since the beginning of last year…

Up and to the right!

A series of higher highs and higher lows hugging a well-defined trendline carve out a picture-perfect uptrend. In fact, SPY is trading a stone’s throw away from record highs.

The same is true for the Dow Jones Industrial Average, while the Nasdaq 100 closed less than 2% away from a new all-time high yesterday (not too shabby considering the DeepSeek selloff last week).

I struggle to humor a bearish outlook when the averages are challenging all-time highs and investors are being rewarded for buying the dip. Of course, that will change if and when the data supports a potential bearish reversal.

A trendline break will be the first sign.

So far, it’s nowhere to be seen. 

The Speculative Runners Are Back!

While we’ve spent plenty of time discussing Magnificent Seven stocks today, you also need to keep an eye on what’s happening under the surface to truly understand what’s happening in this market.

If we turn our attention to some of the frothier plays from late 2024, we can clearly see that speculators are back and driving these stocks sharply higher.

Over at The Trading Desk, we just grabbed onto a furious breakout in AST SpaceMobile (ASTS) earlier this week.

This stock is no stranger to massive moves. In fact, it has quietly marked time since last summer’s 1,300% rally for the better part of the past five months.

We knew this stock could get explosive. So when it finally started to break out of its consolidation earlier this week, we pounced!

This trade is shaping into an absolute monster. Shares are up by more than 20% since Tuesday morning — and our calls are up a lot more.

The media and mainstream analysts can pretend they know where the market is headed. I’m not interested in their predictions…

I’m simply focusing on the facts — and following the trends.

What I do know is this…

Despite the noise and growing bearish sentiment, this market is offering strong setups for alert traders. Take advantage while conditions are still favorable!