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Before Economy Gets Much Better, Buy Stocks: Top Strategist

The S&P slipped lower Monday as investors took a breather after Wall Street posted six consecutive weeks of gains.

In addition, the European Central Bank threw cold water on hopes for further easing soon to stimulate the economy. In response to a German magazine report this weekend about ECB bond-buying, a central bank spokesman said it was misleading to talk about decisions that had not yet been taken.

"Following six straight weeks of gains for the S&P 500 and Dow industrials, stocks enter the new week in an overbought condition," says Bruce Bittles, chief investment strategist in a Reuters interview.

"Investor sentiment has turned more optimistic in recent weeks. This could be problematic, given that sentiment is approaching extreme optimism at a time when the seasonal headwinds begin to surface," he adds.

Wells Capital management chief investment strategist Jim Paulsen sees the market a little differently.

In a live interview on CNBC’s Fast Money Halftime Report he argues that the S&P will print 1500 by the end of the year.

Paulsen sees three major catalysts that he firmly believes drives the stock market up and away.

The first he says, is that the US economy is exiting its soft patch. "We’re getting a lot of good reports – not just housing – but unemployment claims are falling, retail chain store sales are improving and we just got better confidence data."

Looking at the US he says, do you want to be out of the market at 13 times earnings with a sub 2% Treasury yield and when the economy is re-accelerating? That’s the big thing."

That may be the big thing - but it's not the only thing. Paulsen also sees two other catalysts and he details those additional tailwinds in the video above.

Posted by CNBC's Lee Brodie

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Trader disclosure: On August 20, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Steve Grasso is long S; Steve Grasso is long PFE; Steve Grasso is long XLU; Steve Grasso is long MO; Steve Grasso is long MHY ; Steve Grasso is long LNG; Steve Grasso is long FRO; Steve Grasso is long D; Steve Grasso is long BA; Steve Grasso is long ASTM; Steve Cortes is long FB; Steve Cortes is long LQD; Steve Cortes is long PPH; Steve Cortes is long XLU; Steve Cortes is short MEX PESO; Steve Cortes is short XME; Steve Cortes is short IWM; Steve Cortes is short COH; Jon Najarian is long AAPL CALL SPREADS; Jon Najarian is long JPM CALL SPREADS; Jon Najarian is long GDX CALL SPREADS; Jon Najarian is long GLD CALL SPREADS; Jon Najarian is long SBUX CALL SPREADS; Jon Najarian is long FB CALL SPREADS; Jon Najarian is long GLUU; Jon Najarian is long CBOE; Jon Najarian is long CME; Jon Najarian is long S





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