Many are now calling for that much-needed correction that may seem overdue — but why? Has the outlook changed that much? Or, are prices just out of sync with current economic conditions?
Based on the market reaction to earnings, Federal Reserve tapering, the Asian outlook and a recovering Europe, I'd say the latter.
None of this information is new at all but it seems like the reality of it all is settling in and causing the market to do some sort of "do over."
For those who say — how come the market isn't responding to improving fundamentals? It did! Remember that 30-percent gain last year? And now, the market is responding once again as market models are being re-populated with the newest macro data, earnings guidance, global monetary-policy changes, international macro data points etc. It's causing strategists/analysts to reconsider initial assumptions and this causes investors to pause.
(Read more: Finally! The stock market gets a reality check)
Pause is not collapse, pause is not a vote of no confidence, pause is exactly that — just a pause, which will allow fundamentals an opportunity to catch up while forcing prices lower to reflect this new outlook as investors demand more.
So, where will this pause take us? Could markets overcorrect with a selloff of 10 or 15 percent?
I don't think we'll see that unless some new and dramatic information hits the tape. My sense is that the market will churn as we continue to interpret the monthly global macro data and if the data continues to show improvement, albeit slowly, then the markets will not panic. Prices will come in line as investors make judgments on the future. The S&P 500 level that seems more reasonable would be the 200-day daily moving average of of 1712, representing an 8-percent pullback off the highs.
(Read more: Marc Faber: Here's how much I want stocks to fall)
I say this because I believe that the recovery is alive. Recent U.S. macro data, including GDP, nonfarm paryrolls, consumer confidence and inflation, point to slowly improving economic conditions. All of these reports helping to restore the confidence that investors had lost during the financial crisis.
We may see equities come under some pressure as the Fed withdraws its stimulus and investors recalibrate, but it is by no means a disaster. There is not a sense of panic or capitulation. The recent weakness has not been met with investors tossing out everything including the kitchen sink nor do I believe it will get there.
Conditions are not ripe for capitulation. Capitulation is equivalent to desperation and that was what 2008-2009 was! That was sheer panic. Those are what we call "black swan" events, something that deviates beyond the norm, something that is almost impossible to predict with devastating consequences. This is NOT that.
This is nothing more than a buying opportunity.
(Read more: 'Hot money' ride could be getting put on ice)
—By Kenny Polcari
Kenny Polcari is director of NYSE floor operations at O'Neil Securities and a CNBC contributor, often appearing on "Power Lunch." Follow Kenny on Twitter
@kennypolcari and visit him at kennypolcari.com.
Disclosure: The market commentary is the opinion of the author and is based on decades of industry and market experience; however no guarantee is made or implied with respect to these opinions. This commentary is not nor is it intended to be relied upon as authoritative or taken in substitution for the exercise of judgment. The comments noted herein should not be construed as an offer to sell or the solicitation of an offer to buy or sell any financial product, or an official statement or endorsement of O'Neil Securities or its affiliates.