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Market Preview: Will March Come In Like a Bear This Year?

NEW YORK ( TheStreet) -- So that's what passes for a sell-off on Wall Street in 2012.

Leap Day was a loser as Federal Reserve Chairman Ben Bernanke put the word out that a better economy means more stimulus is less likely. Not exactly a shocker and arguably one of those good problems you hear about.

The sentiment from Big Ben spooked some but this wasn't the mass exodus the bears (and even some bulls) have been expecting, and February goes into the books with a solid 2.5% gain for the Dow Jones Industrial Average, putting the blue chips up 6% year-to-date and five months in a row.

S&P Capital IQ is still looking for a near-term decline of 3-5% in the S&P 500 (up 8.6% so far in 2012) but the firm says the index could push past its year-end target of 1400 before that occurs. It's advising folks to trim their stock holdings, which mutual fund investors have appartently been doing of late.

"[W]e acknowledge that the S&P 500 could overshoot into the low-1400s before the pullback commences," the firm said on Wednesday. "We view current price levels, as well as a price overshoot, as very good areas in which to lighten equity exposure. We think the next pullback could be particularly sharp, due to the price structure of many market indices and individual stocks. There is very little chart support beneath the market, in our view, so when a drop comes, get your fingers out of the way."

Meantime, Ian Shepherdson, chief U.S. economist at High Frequency Economics, found Bernanke's testimony, which will get another airing on Capitol Hill on Thursday, more interesting than expected. He thinks that pledge from the central bank to keep interest rates "exceptionally low" until late 2014 looks a bit shakier now than it did in late January.

"We wonder if the markets might look back on this event at some point in the not-too-distant-future, and think of it as the first step along the road to an eventual policy tightening," he said on Wednesday.

Shepherdson said that Bernanke's unwillingness to move beyond boilerplate on QE3 was telling, and that this reinforced his conviction that there won't be another round of bond buying from the central bank for the stock market to benefit from. Bernanke's puzzlement about the improving jobs market underlines the conundrum the chairman may find himself in if the unemployment rate continues to drop.
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