Where's the Selloff?

Everyone on the Street is expecting a pullback, so where's the selloff?

Today was a great chance to drop the markets: We opened up fractionally, and immediately sellers emerged.

This is the classic short play: Short the market hard right after the market opens up, and see how far you can push it down.

It didn't work; the S&P dropped all of 3 points before stocks began rallying just before 10 AM ET. We are now just off the highs of the day.

Still, the pullback talk is everywhere, and most are eager for it to come.

The talk is of a pullback of at least 10 percent, that would bring the S&P 500 back to the 900-910 level.

Cannacord Adams said that a "more cautious tone is clearly being established and the chances of a real pullback are increasing."

Lowry, the oldest technical analysis service, this morning said, "the correction from the August 13 rally highs probably has further to run."

The correction? We're only down 2 percent from the August 13th highs! Yeesh!

The bears believe that the markets will drop in September and October when its obvious that we won't get the boost in consumer spending that we are expecting, and that the Asian recovery is based largely on short-term stimulus from Japan and China. Bears believe the market will have difficulty rallying for the rest of the year.

The bulls believe we will get a drop on overbought conditions, but they want the market to drop so they can BUY AT A LOWER PRICE.

The majority of traders are in the second camp right now, even though they believe fundamentals are poor.

Bulls have a strong argument: we already know we won't get the boost in consumer spending, and the markets are hardly falling apart!

Example: Home Depot, in its conference call this morning, said that comparable store sales would not turn positive until the second quarter of 2010 OR the second half of 2010! That is a long way from 2009! Stock is up 3 percent today.
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