Is a summer correction on the cards?

Leslie Shaffer | Writer for
Wall Street is in a 'bull market lull': Pro
Wall Street is in a 'bull market lull': Pro

As markets head for the summer doldrums, analysts are becoming more concerned that the long bull market in stocks is ripe for a correction.

"We're in a period where equity markets generally want to go up, but they went up so much last year, that they're having a bit of a holiday," Richard Harris, CEO of Port Shelter Investment Management, told CNBC.

"This is a kind of a lull in an ongoing bull market and as a result there is some sensitivity to subtle bits of bad news," he said. "While the markets are not quite too sure, not quite too confident in themselves, this is the time we might have a little (rapid correction)."

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The S&P is now nearly 1 percent higher for the year, after rising around 30 percent last year, but it is still down over 1 percent from the all-time high it touched in early April.

The Dow Jones Industrial Average is off around 1 percent this year, after climbing over 22 percent last year.

Harris expects the market could "take fright" from any number of factors, such as an escalation of tensions in Ukraine, deleveraging in China or even if the Federal Reserve's moves to taper its asset purchases prove to be too fast.

Bull and bear statues outside the Frankfurt Stock Exchange
Hannelore Foerster | Bloomberg | Getty Images

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The correction could be as much as 8 percent over a four- to six-week period, Harris said.

But he added, "obviously, it's a buying opportunity," and he expects a recovery to take around 10 weeks.

Harris isn't alone in expecting the market rally may be getting a bit tired.

"What we've seen over the past few weeks is a narrowing of leadership in the market," said Hans Goetti, head of investment for Asia at Banque Internationale a Luxembourg. "Fewer and fewer stocks are participating on the upside," he said. "The underlying market is deteriorating."

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He doesn't expect the market needs an actual trigger for a correction, citing the recent correction in social media stocks.

Earlier this month, high-flying momentum names in biotech, Internet and social media sectors sold off sharply, with the Nasdaq index dropping as much as 9.7 percent from its March high, flirting with the "official" correction level of 10 percent, before retracing some losses. The index is still down nearly 4 percent from its early April high.

Many U.S.-listed technology stocks entered bear-market territory—or a loss of at least 20 percent.

"Valuations are no longer cheap," and there hasn't been a 10 percent correction since 2011, Goetti said.

He noted that more funds are flowing into stocks considered defensive or lower risk. "We see a bit more flight to safety," he said. "Are we going to see a huge pullback? Maybe."

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He expects shares could fall as much as 10 percent to 15 percent but believes the Federal Reserve will likely offer a safety valve.

"If conditions deteriorate, the Fed would hold off on tapering and that would, of course, boost prices again," Goetti said, noting the correlation between the Fed's moves to increase its balance sheet by buying assets and gains in stocks is around 90 percent.

—By CNBC.Com's Leslie Shaffer. Follow her on Twitter @LeslieShaffer1