The S&P 500 index stands just 1 percent below its record high, but danger lurks beneath the surface, says hedge fund manager Doug Kass, president of Seabreeze Partners Management.

The stock market "looks serene gliding across the pond, but underneath the surface it's furiously paddling. . . . There's massive turmoil," he writes in an article for TheStreet.com.

He cites several signals.

• "New 52-week highs have been declining in every rally since February."
• S&P 500 stocks trading above their 200-day averages have reached lower highs in every rally since last September.
• "Healthcare and technology are the only major sectors even close to maintaining breadth and momentum."
• Utilities peaked in the late week of January and are now almost 10 percent below that top.
• "Energy stocks topped out in April 2014 and today are about 21 percent below that peak."
• Transports touched their highs in November and broke major support levels last week, falling 17 percent below their highs.

Bottom line: "It's almost as if Daffy Duck has taken over the market's pond these days," Kass says. "Let's call this the Summer of Looney Tunes."

When it comes to valuations, the S&P 500 carried a trailing price-earnings ratio of 21.46 Friday, up from 18.26 a year ago, according to Birinyi Associates.

But Jeffrey Saut, chief investment strategist at Raymond James, doesn't share Kass' concern. He told Barron's the index could double to 4,300 within nine years.

"We are in a secular bull market," Saut said. "I have seen this play before, and secular bull markets tend to last somewhere around 14 or 15 years. And they tend to compound at a double-digit rate"

As for the near term, "the second quarter, from an economic standpoint, is still going to be a little squishy," he noted. "But the underlying economy is actually stronger than the surface figures suggest. I expect to see stronger economic numbers coming out in the third and fourth quarters." The economy shrank 0.7 percent in the first quarter.

Saut thinks the S&P 500 will reach 2,250 by year-end.

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