Callback alert! The bullish sentiment in the US stock market is too strong, and even Wall Street, which has been firmly bullish, is starting to worry.

Currently, there is a sense of optimism in the US stock market, with investors seeming to believe that the market will only go up. However, this has raised concerns for one of Wall Street's staunchest bulls, as all this optimism is sending out reverse danger signals. Ed Yardeni, the founder of Yardeni Research and a long-time bullish analyst on the US stock market, has expressed his concerns after experiencing nearly six months of crazy gains. He believes that there are too many bulls, and this surge has almost ignored all warnings. As investors remain cautious about Federal Reserve Chairman Powell's potential rate cut in December, Yardeni is now starting to question his previous predictions about a year-end rally in the stock market. Data shows that the S&P 500 index has surged 37% since early April, with only five occurrences of such growth since 1950. It is now November, traditionally the month with the highest investment return rates over the past thirty years. Yardeni predicts that due to both market sentiment and technical indicators now entering overbought territory, the S&P 500 index could drop by as much as 5% by the end of December. Yardeni said, "The key question is whether this rally has run too far and whether it can continue in the last few months of the year. In a market that is overall weak, any unexpected event could cause a fall from the highs, but considering traders are usually more optimistic around the holidays, this scenario may be unlikely." According to an indicator, investors are currently at their most optimistic state in a year. A survey conducted by Investors Intelligence in the week ending October 29 showed that the ratio of bulls to bears had jumped to 4.27, exceeding the key threshold of 4.00. Yardeni Research's analysis suggests that historically, a threshold above 4.00 usually indicates overly optimistic market sentiment. The American Association of Individual Investors' weekly survey of retail investors also showed another sign of high bullish sentiment: for the fifth time in the past seven weeks, bullish sentiment levels have surpassed the historical average of 37.5%. Yardeni's cautious approach is noteworthy because he has been one of Wall Street's staunchest bulls since the market bottomed in April. He had previously predicted that by the end of 2025, the S&P 500 index would reach 7000 points about 2.3% higher than the closing price last Friday, nearing the highest values projected by institutions. After a $17 trillion rebound in the S&P 500 index, key market technical indicators are nearing historical extreme levels. Yardeni stated that the S&P 500 index's trading price is 13% above its 200-day moving average, indicating an overextended trend. The Nasdaq 100 index's trading price is 17% above its long-term support level, approaching the largest price differential since July 2024, which was followed by a market sell-off triggered by yen carry trade arbitrage in August 2024, causing ripples throughout the market. Of course, market sentiment could remain high for several weeks or even months before a significant drop occurs in the stock market. Another well-known bull, Tom Lee, the head of research at Fundstrat Global Advisors, pointed out that given the strong performance of bull markets in November, he is buying on dips. Lee stated in a report sent to clients on Friday, "Although there may be some understandable volatility to digest the strong gains in October, we expect November to be a month of gains." This remains the "most unpopular rally." The S&P 500 index has risen by 16% so far in 2025. Historical data suggests that if the index has risen by at least 10% in the first ten months of the year, it indicates good stock market performance for the remaining time. According to data compiled by Jay Kaeppel, a senior research analyst at SentimentTrader, since the 1920s, the average increase in the S&P 500 index in November and December is 4.2%, with the worst performance being a 3.8% decrease in November and December of 1938. As 2025 nears its end, with traders betting on the Federal Reserve easing monetary policy faster than implied, the risks for investors have increased. Approximately twelve Fed officials gave speeches this week, including New York Fed President Williams and Fed Governors Waller and Bowman. Any information they provide regarding when the next rate cut will happen will be closely monitored. Economic data is also busy this week, with Wall Street focusing on US factory activity and manufacturing data to assess economic health. Due to the government shutdown, the monthly US non-farm payroll report may not be released on time, so other economic data becomes even more critical. Earnings reports from McDonald's Corporation(MCD.US), Yum! Brands, Inc.(YUM.US), Uber Technologies, Inc.(UBER.US), and Lyft(LYFT.US) will also help Wall Street evaluate consumer confidence. Analysis shows that over half of the companies in the S&P 500 index have reported quarterly earnings, with the index expected to achieve growth for the ninth consecutive quarter, with profits projected to increase by 13%, nearly double the pre-season expected figure of around 7%. Yardeni said, "If you have cash on hand, buy on dips. But don't take risks with shorting the market and expecting a sharp decline in the US stock market. I don't think there will be a drop of more than 10% in the near term."