How This Unloved Bull Market Continues to Smash Records

Tickers in this article: GSPC SPX
NEW YORK ( TheStreet) -- A new record high. Then more chatter about a coming correction. Stocks dip ever so slightly, then recover, and presto, yet another record high. And then we repeat.

That's how this bull market has moved over the past few weeks; for every fresh record, triple the fears of an eventual market correction. Even now, with the Dow Jones Industrial Average flirting with a 17,000 level and the S&P 500 spiking intraday and closing in on 2,000, the drivers behind historic gains remain murky and market confidence hesitant. Yet the market continues to creep higher. 

The S&P 500 has gained 6.8% in 2014 after advancing 30% last year. On Tuesday, the U.S. benchmark closed at 1,973.32.

On this day, at least, the momentum-drivers were somewhat clear: U.S. auto sales gained at a healthy clip, fears of sluggishness in the Chinese economy were partially alleviated as manufacturing expanded for the first time in six months, while U.S. manufacturing booked its 13 th consecutive month of expansion, albeit at a slower pace than previously.

Those dinosaurs of industry -- automobiles and manufacturing -- have carried these markets to new heights recently and again on Tuesday, not the slippery high-momentum plays which have moved the market this year with little more than a cough.

The economic snapshot those provided were enough to give small-caps, some of the most beaten-up stocks of the last quarter, a well-deserved boost. The Russell 2000 surged 1.1% to 1,205.94, settling slightly lower after a record intra-day high of 1,213.55.

Over the last few weeks, general momentum among the major indices has been near effortless with the S&P reaching new records with no surge of strength behind gains. Instead, this is a market driven more by fear than hope with tidbits of data powering markets in spits and spurts, said Todd Salamone, an equities analyst at Schaeffer's Investment Research.

"We hit a couple weaker-than-expected reports (PMI and construction) and the fact that we're rallying suggests that there was some fear that the Federal Reserve will increase rates sooner than expected," Salamone told TheStreet. China, he said, had been a major concern after months of data reflecting a shrinking manufacturing base.

"Judging by the price action it would suggest some of these fears have been alleviated which is putting a powerful bid under the market right now," Salamone added.

With those concerns allayed, at least temporarily, Salamone forecasts that the S&P 500 will rise to 1,980 from a technical perspective and even as high as 2,000, a level in hand's reach if an upward trend can continue through this week.

"The S&P ended [Monday] at a little over 15.5x forward earnings, some were 17.5-18x last 12 months' earnings, so from a valuation perspective, that is not nosebleed levels by any means," Fenimore Asset Management investment analyst Drew Wilson pointed out.