CHART OF THE DAY: Citi's Levkovich Sees Stocks Going A Lot Higher This Summer

The S&P 500 is higher today than it was during the height of the dotcom and credit bubbles.

Does this mean investors should brace for a sell-off?

Not necessarily. Especially if you believe in the contrarian signals sent by sentiment.

"The rally’s resilience would argue that investors are upbeat but the data does not support the premise," said Citi's Tobias Levkovich in a note to clients yesterday. "While stock prices break into new highs, there has been little in the form of embracing it by fund managers as defined by various metrics. Earnings have been a very important driver for shares as they have been for years, but there does not seem to be a belief system in place that things are anywhere near sustainable in the face of global economic uncertainties and even some increasing geopolitical concerns."

Citi's proprietary Panic/Euphoria model has a pretty good track record for sending accurate buy and sell signals based on its reading of investor sentiment. When the model says investors are panicking, then it's time to buy. When they're euphoric, it's time to sell.

"[O]ne can see that as the markets have broken into new high territory, investors have become more worried given that the readings have slid deeper into neutral territory (see Figure 1)," wrote Levkovich.

While the model doesn't scream buy, Levokovich's interpretation is still quite bullish.

"In our minds, this would imply that share prices can move even higher in the near term and an S&P 500 overshoot to 1,650-75 is plausible by the summer followed by some giveback later in the year."