“Sentiment is quite complacent out there,” Stockton said. “We’re much more overbought from the long-term perspective, so I think it’ll be a more challenging year marked by more corrections.”
Stockton specifically pointed to the small and mid-cap arenas, which she said have grown at an unsustainable rate. In the long term, however, she said the market will break its current resistance level at around 1150 and rise to the 1220-1230 range.
The joining of large-cap laggards such as General Electric* and Wal-Mart to the rally, which was previously dominated by small and mid-cap stocks, shows that the markets haven’t yet moved too high, said Carter Worth of Oppenheimer.
“It’s very unlikely for the market to be in the cusp of immediate trouble with names like, again, GE [and] Wal-Mart asserting themselves just here today,” he said.
Worth’s firm is identifying companies that have yet to recover their losses from January’s sell-off, saying a number of large-cap companies are ready to mimic gains seen on the Russell 2000 small-cap index.
“There are a lot of large-cap names that are poised quite precisely to pop, if you will, above their January tops,” he said.
*GE is the parent company of CNBC and CNBC.com.
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No information was immediately available for Stockton, Worth or their companies.