Stocks Vulnerable to Pullback as Sentiment Reaches Extreme Levels
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Supportive flows for stocks are diminishing, leaving the market vulnerable in the short-term. Market internals and breadth are no longer wholly supportive.
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Sentiment and positioning have reached extreme bullishness, meaning it will be hard for stocks to move higher sustainably.
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The market seems priced to perfection. A pullback or even a mild correction seems likely.
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The "window of vulnerability" is opening around mid-January options expirations, a seasonally weak period.
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Positioning by traders is very bullish, especially in the Nasdaq, suggesting the rally may have been overdone. Further gains could be limited.