Updated with share prices.
NEW YORK (
) -- Analysts weigh in on how to watch a potential pullback in the U.S. stock market and how to position oneself for changes on the Russell 2000.
1) Watch the Pullback
With the S&P 500 up more than 7% this year, many market analysts are trying to predict the timing of a pullback. Smart investors have been buying on the dip, but fear that the market needs to cool off after a steep run up is keeping a cap on aggressive buying.
Here's a take on the index from Sam Stovall, equity strategist with S&P Capital IQ: "We think that if the S&P 500 gets into our target zone of 1,360 to 1,380, the index would be vulnerable to a 3% to 5% pullback."
His prediction is based on where the index found resistance at its high last year. Furthermore, he says, "a move into this area would complete the measured move based on the breakout from the inverse head-and-shoulders formation that occurred in January."
Also, "an initial Fibonacci extension based on the size of the inverse head & shoulders pattern also targets this region." In other words, by taking into account the levels at which many traders tend to take profits, analysts can come up with a forecast of where the index might top out next.
For longer term investors, the pullback shouldn't make much of a difference. Stovall predicts that the index will rise higher than 1,400 after taking a breather.