(Fortune) -- Main Street investors have shrugged off stories about Wall Street trickery and absorbed brightening economic headlines to stage an ever-so subtle return to U.S. stocks. Until two weeks ago, mom-and-pop investors were buying U.S. equity funds in the steadiest fashion since late 2004, according to funds tracker EPFR Global. When you combine retail and institutional investors, money flowed into U.S. stock funds for eight out of nine weeks ending April 21.
Many in the financial press took this as a bullish sign, concluding that Main Street had regained enough confidence -- or had missed enough stock gains -- to dip back into the market. The cheering might have been a tad premature. Retail investors sounded a familiar refrain and yanked $400 million out of U.S. stock funds the next week, according to EPFR data, before buying stocks again.
What do the recent in-and-out-and-in-again moves mean for stocks? A bright future, argue strategists, who paint a Goldilocks scenario around retail investor buying. "It's neither too hot or too cold," says Vincent Deluard, global equity strategist at TrimTabs Investment Research, an institutional research firm that tracks money flows. "They're not scared, [and] not crazy. It's a good thing for the market."
One of the ultimate lagging indicators is the retail investor, someone who is more likely to look backward a year to predict when to buy and when to sell. They poured a record $30 billion a month into U.S. stocks at the technology bubble's peak, and again bought during stocks' frothiest days of 2007. Then they sold in large numbers amid the market lows in March 2009. For this reason, retail investors when aggressive also prove to be great contrarian indicators.
The numbers today remain small: Investors only put about $1.1 billion into U.S. stocks in the past five weeks, according to EPFR Global. (That's a drop in the bucket compared to nearly $3 trillion parked in money market accounts.) And fixed-income still attracts the most investment dollars, with U.S. bond funds adding $385 million in the past week to mark the 68th straight week of inflows.
The bullish picture for stocks lies not in the sheer size of inflows, but rather in the portrait retail investors paint.
"People are accepting the fact that we are in a bull market," Ryan Detrick, senior technical strategist at Schaeffer's Investment Research, says. "There's nothing wrong with that; there's a lot of money that can move out of bonds and into the stock market."
Schaeffer's, an options trading firm in Cincinnati, uses sentiment -- from retail trading to magazine covers -- and technical strategies to predict market moves. With quietly bullish retail investors, Detrick is betting on more stock gains in the next two to four years.
That won't change until Main Street starts pouring into equities, which can take years into a bull market. "Now when does it become a worrisome sign?" he asks. "That's the ultimate question. But we're nowhere near that."
To be sure, Main Street investors can be a fickle lot. More headlines exposing the questionable Wall Street practices that led to the financial collapse could turn them away from stocks. And consumer confidence hinges on continued job growth. But for now, mom and pop's focus seems to be on a rosy outlook.