The S&P 500 is up 28% from October 2011 through early last week, with sentiment reaching an optimistic extreme of 70.7% bullish, as measured by NDR's Crowd Sentiment Poll. This is the same level of bullishness that accompanied the S&P 500's April 2010 peak, which was followed by a 16% decline. We do not expect that much of a pullback this year because central banks have been pushing down global short-term interest rates significantly for the past six months (don't fight the Fed), unlike 2010 and much of 2011 when global short rates were rising. Thus we think that stocks will have either a sideways consolidation period or a correction of 5% to 8% to work off the optimistic sentiment.

David Fuller's view This sounds about right to me, although the more overextended a market becomes in the short-term, the more susceptible it is to a somewhat larger reaction.

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