In almost any bull market, you’ll see a stretch of gains, followed by a modest pullback, which is then followed by more gains. But in this market, there are no pauses.

Though the S&P 500 repeatedly moved above and below its 150-day moving average (MA) in the early stages of the bull market, the market now appears to be on autopilot, inching steadily higher with nary a pullback. The fact that the S&P 500 has now remained above its 150-day MA for more than 18 months is truly impressive. Said another way, the S&P 500 has not had a four-day losing streak thus far in 2014. Yet in prior years of this bull market, we saw such pullbacks roughly nine times per year, according to Bloomberg.

Shares held by short sellers represents about 2% of the stock market, according to financial research firm Markit. That’s close to the lowest level since 2006. This recent article in Fortune suggests that the dearth of short-selling is a sign of bullishness.

It’s not. It’s a sign that short selling has gotten too painful.

Many investors that had been inclined to hedge their portfolios with short positions have been burned too many times in this bull market — and they have no desire to get in front of a moving train like Tesla (Nasdaq: TSLA), Chipotle Mexican Grill (NYSE: CMG) or Netflix (Nasdaq: NFLX). The problem with a lack of short selling is a key valuation corrective is gone from the market, and stocks can run in an unimpeded fashion to levels that become hard to justify.

Equally important, such stocks can crater badly if bad news emerges and their valuations snap back like a rubber band.​

The amount of margin debt on the New York Stock Exchange rose to $464.3 billion in June, right near the all-time high set in February.

Over the past two years, this figure has soared 63%, or $180 billion. In that time, the S&P 500 has risen 43%, implying that margin debt — in relation to the market’s total value — is moving into the risk zone. The risk, as we saw in 2000 and 2001, is if the market starts going down and margin debts need to be repaid at an accelerating pace.

Source: NYX data​

According to Barry Ritholtz, who pens the terrific The Big Picture blog, bull market rallies (since 1945) tend to last an average of 221 days before we see a 10% pullback. And in those rallies, the market tends to move up about 32%.

Well, in the current market, we haven’t seen a 10% pullback in more than a thousand days — and in the three years since, the S&P 500 has risen 77%.

Investors are starting to forget what a correction feels like, and if one occurs in coming quarters, it will be interesting to see if it is viewed as a buying opportunity… or a reason to suspect that this era of terrific gains has come to an end.​

Over the past few years, the S&P 500 is rising at a noticeably faster pace than underlying corporate earnings growth.

As a result, the market’s price-to-earnings (P/E) ratio moves ever higher. Indeed the gains thus far in 2014 may already exceed the full-year profit gains for S&P 500 companies. This doesn’t signal that the market must drop, but if history is any guide, it suggests that future market gains will be much more muted to give earnings time to catch up.

S&P 500 Earnings Growth vs. Market Gain​​
 

Full-year profit estimates will come under fresh attention in five or six weeks: “On average, September is the month with the most negative revisions, as if people get back from summer vacation, go to some conferences, and recognize that dialing back their estimates is prudent,” note analysts at Morgan Stanley.

As it stands, analysts currently anticipate aggregate profit growth to be less than 10% this year, and if they revise that figure lower in September, as Morgan Stanley predicts, then the market gains thus far this year have likely already exceeded profit growth. ​