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.