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Rockwell's Cardillo Cautions S&P 500 Retreat to 1,775

NEW YORK (TheStreet) -- The S&P 500 has slid 0.92% in the last four sessions after finishing at a record close of 1,807.23 on Nov. 27, signaling that the benchmark index may be at the outset of a pullback that market watchers have said is long overdue in the best year so far since 1997.

^SPX Chart

Peter Cardillo, chief market economist at New York-based Rockwell Global Capital says equity markets as well as bonds are anticipating a Fed reduction in its stimulus program considering the reasonably positive economic data this week. The irony of strong economic data pushing stocks lower is the product of Fed policies that have helped fuel a 25% run in the S&P 500 in 2013. 

The S&P 500 could retrace to 1,775, Cardillo says, if the November government jobs report exceeds economist expectations. the Rockwell Capital economist is forecasting a job addition of 225,000, which adds to the prospects of the economy beginning to accelerate and takes the market back to December tapering chatter.

"So I think the market is adjusting to that and so between the tapering factor and and the fact the market has done extremely well without pausing for a while suggests that we're going through this little technical pullback," Cardillo said over a phone interview.

After that, the market will probably trade sideways for the balance of the year and begin to move higher in the first quarter, says Cardillo. He sees the S&P 500 heading for a nice rally in the first quarter in light of a stronger economic picture.

Cincinnati-based Schaeffer's Investment Research's senior equity analyst Joe Bell agrees that the heavy dose of jobs data at the end of the week will steal most of the spotlight. "The momentum has been strong, but many of the indices continue to struggle with round number areas they first approached last week and short-term consolidation before the next up leg makes sense here," he said in an email.

--Written by Andrea Tse in New York.

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