February has often proven challenging for the market and is the weakest link of the “Best Six Months.”
In addition, Investor’s Intelligence latest sentiment survey reported bulls at 54.7% and bears at just 21.1%. The spread between the two is now higher than it was near the two market tops of 2012. The high bullish percentage and the spread suggest there may not be as much money left on the sidelines as some would believe. Granted the Fed is providing new cash at an $85 billion per month rate, but the recipients may not consider it all to be investment capital. With the present technical outlook stretched, just a few remaining bears left to convert to bulls and seasonally weak February underway, conditions appear ripe for some kind of moderate pullback or at the very least a period of consolidation.