The Dow Jones Industrial Average has crossed 13,000 and the broader S&P 500 stock index has risen above 1,370, but the bullish psychological impact could actually drag down the market in days to come.
The stock market's rise above levels unseen since the boom could lead to greater expectations that might be disappoint if stocks are overvalued, as analysts told CNBC, or if economic recovery begins to lag.
Schaeffer's Investment Research found that during 39 times when the Dow passed a 1,000 point threshold, shares fell an average of 0.4 percent in subsequent weeks. The index has a 0.28 percent gain during a typical two-week period, the research firm said.
That syndrome may already be emerging. One of the biggest gainers on Tuesday, when the two equity indexes topped their respective milestones, were IBM Corp. (NYSE: IBM). But by mid-Wednesday, shares were down by 30 cents to $197.59.
Elevated expectations of share price increases may not disappoint, however, if factors boosting stock indexes continue. This week's market forces included positive economic indicators like GDP growth in the fourth quarter being revised upwards to 3 percent Wednesday, and unemployment and jobless claims continuing to trend downwards.
Two broader factors buoyed stocks on Tuesday: the sale of Italian bonds at low rates was successful, and the U.S. Conference Board's consumer confidence index rose to its highest level in a year, Steve Reitmeister, an executive vice president for Zacks Investment Research, said in a Wednesday newsletter.
Reitmeister expects the S&P to hover around 1,370 and eventually approach a new high of 1,400. Once that level is reached, Reitmeister expects larger companies to become more attractive compared to smaller and more aggressive options.
When the market stalls out for a while or even retreats, then it is time for these more conservative plays to take center stage once again, he wrote.