Are U.S. markets about to rebound? A five-session streak during which the Dow Jones Industrial Average climbed more than 4% has turned some traders more optismistc.

The market's gains follow a mostly-upbeat earnings season, which suggests that the economy could be picking up steam. The Dow looks poised to end the month up more than 8%, as does the S&P 500 index. The stock market also appears less volatile than it did a month ago, which could lure more investors with a small appetite for risk.

"The U.S. equities market continues to make constructive moves higher, and has perhaps reached a very short-term, slightly overbought level," Andrew Barber, strategist at asset management firm Waverly Advisors, wrote in a report. "Rather than focusing on the pullback (which should be a buying opportunity), be aware that a very large upward move could emerge from these levels." He suggests that long-term investors avoid broad-based index exposure and that short-term investors trade lightly until volume rises.

Much of the uncertainty that still looms over the stock market stems from the disconnect between Wall Street gains and Main Street confidence. Even as stocks rallied in July, consumers were edging back. The Consumer Confidence Index fell in July to a reading of 50.4, a larger-than-expected drop from June's 54.3, the Conference Board said Tuesday. (A reading of 90 indicates a healthy economy.) Whether the market has fully priced in the causes of a decline in confidence remains to be seen.

Corporate profits are broadly above where they were before the recession started, with companies building up cash reserves at levels not seen since 1960, Chris Maxey, an analyst at Fortigent, wrote in a report. However, strong second-quarter earnings appear to have come at least in part from cost cutting primarily through layoffs rather than sales growth, and employee compensation has been declining since the third quarter of 2008. Now, as companies post greater profits with fewer employees juggling more responsibilities, many analysts are wondering whether there is an incentive to start hiring again.

"The challenge for the broader economy is that companies are becoming more profitable but are unwilling to pass on those gains to their respective employees," Maxey wrote. However, he adds that in the second half of this year, companies may start hiring.

For now, the market appears to be brushing off concerns over the jobs outlook. However, a persistently high unemployment rate eventually could weigh on stocks -- even as earnings continue to grow.

"For asset prices to rise, there has to be increases in future expectations about earnings and cash flow," Bob Doll, a vice chairman at Blackrock, wrote in a report. "In the case of the United States, we are getting a limited amount of that. The U.S. economy continues to face significant headwinds, giving us reason to believe that the move higher in equity and other risk asset prices will likely be a long, hard grind characterized by continued volatility."