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'RealMoney' Radio Recap: Playing the Pullback

It looks like everything is working in this market -- momentum and contrarian plays, big-cap and small-cap stocks -- but Aaron Task, co-executive editor at told "RealMoney" radio show listeners on Wednesday that it's time to start thinking hard before chasing the market.

In this environment, fund managers will feel performance anxiety if they stayed out of stocks, Task said, because they're way behind their benchmarks if they're sitting on cash.

It's now even harder to figure out where and when to get into the game now that everything has performed so well. And managers who aren't in big plays look like they've already missed out.

For example, mutual fund managers who didn't get in on Apple (AAPL) in 2005 and who stayed out because they were waiting for a pullback are starting to feel the heat.

They start to worry because they want to preserve their raises, bonuses and even their jobs, so they feel compelled to chase the market.

But as individual investors, we need to resist that temptation, said Task, because there will be a pullback, and that's when to get in.

For example, cyclicals including DuPont (DD) issued a warning, and there has been negative news from Alcoa (AA) and Phelps Dodge (PD).

Combined with lower prices from automakers and a slowing housing market, these signs show that some market segments will weaken, he added.

Waiting for Cyclicals

Brian Belski, senior equity investment strategist at Merrill Lynch, told Task that the influx of hedge funds and commodities funds has added to the performance anxiety for traditional portfolio managers.

It's better for the investor because it means more diversification and more choice, but it means more competition for the equity manager, Belski said.

Belski discussed a recent Merrill Lynch report that said cyclical sectors including materials companies should see a move higher over the long term, thanks to factors like falling fuel prices.

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