Ned Davis of Ned Davis Research, who has been in synch with the tape but watchful of excessive valuation and sentiment risks, wrote last week that his own sentiment measure shows "the crowd is finally throwing in the bearish towel and starting to believe the better economic news. However, crowd psychology often acts as a pendulum with extremes in one direction matched by extremes in the opposite direction....I am not certain we have matched the record pessimism seen from November 2008 to March 2009."

He continues a "mostly bullish" trading strategy based on not fighting the Fed or the tape, but is selling call options as a "hedge against excessive optimism."