An S&P 500 pullback to the 50-day moving average of 1834 is expected, while a move lower to the 200-day moving average is a possibility if earnings begin to really disappoint. This, I believe will be the extent of the repricing. I am not in the camp that thinks a 10-percent correction is in the cards. Ten percent from the highs would take us back to 1690. The only way the market would really start to break down is if geopolitical tensions heat up or the macro data weaken substantially.
To be clear, any increased tensions in Eastern Europe between Russia and its neighbors will cause global markets to go into "risk off" mode but I also would expect this to be temporary, providing yet another opportunity for the longer-term asset manager/investor.
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Once the market adjusts, then some churn to build a foundation should be expected as the macro data improves, the Fed withdraws and the talk of rate normalization continues. Then, a move higher based on real fundamentals will take hold. The market can and will sustain higher rates — it just has to be convinced that the economy is firing on all cylinders.
—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.
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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.