Here's The Pullback You've Been Waiting For

NEW YORK (TheStreet) -- Alas, the pullback has arrived.

Mark Arbeter, chief technical strategist just put out a report calling for 3% to 5% pullback in the next four weeks or so. After weeks of speculation -- is this rally too good to be true? -- stocks are finally taking a breather. It's about time and sure enough, the blame goes to the turmoil in Europe. The refusal by Greece's European creditors to give the country its second bailout package was the last straw. Stocks are sinking by 1% on last check.

You can still win in the long term. The consensus among many analysts seems to be, simply, "buy-on-the-dip."

"We think that the S&P 500 could decline down to the 1,290 to 1,320 region sometime in the first part of March and, in our view, that would represent a very good opportunity to once again raise equity exposure," writes Arbeter.

The key word describing the market right now? Overbought. Arbeter has a number of reasons to back up this thesis:

"Both the total CBOE put/call ratio as well as the CBOE equity-only ratio have fallen to fairly low levels, indicating to us a strong preference for the long side of the market. Many times in the past, overheated (very low) put/call ratios have led to at least minor market pullbacks. Market polls are also seeing fairly high levels of bullish sentiment. At the same time, daily price momentum based on the major indices has cycled into overbought territory. The S&P 500 was recently more than 6% above its 50-day simple moving average, one of the higher readings we have seen over the past decade. In addition, the percentage of stocks on the NYSE trading above their 50-day and 200-day moving averages has cycled into overbought territory, and the up issues ratios (up issues/total issues) on the NYSE and the NASDAQ are both extremely overbought, in our view."

In terms of profit taking, watch out for the technology sector. Arbeter says that "the Nasdaq 100 was recently 8% above its 50-day simple moving average, one of the most overbought readings in the past decade." He also notes that the S&P GICS Information Technology Index has beaten all other sectors this year, up 13% so far.

As for Apple, which has been propping up the Nasdaq, Arbeter writes that "the stock has gone parabolic." If Apple doesn't have any more room to rise, the broader index will likely take a hit as well.

Buckle in for a bumpy road.

-- Written by Chao Deng in New York.

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