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With Investors So Bullish, Pullback Must Be Coming
CNBC.com | February 10, 2012 | 02:01 PM EST

With many investors convinced stocks are going higher, economic data improving and Greece's debt crisis moving toward some kind of conclusion, now could be the perfect time for a market pullback.

Yes, it sounds counterintuitive to expect the market to go down when so many things seem to be pointing up. But this is the stuff corrections are historically made of — buoyant sentiment that precedes a retreat.

"While some market observers view high investor bullishness as an indicator that stocks will continue to advance, we believe lopsided sentiment is the Achilles’ heel for markets," Daniel Aaronson and Lee Markowitz, of Continental Capital Advisors in New York, wrote in a recent analysis.

"The four-month rally that started at the October 2011 interim low has led to a surge in investor bullishness and positioning," they continued, "which when combined with insurmountable sovereign debt problems, sets the backdrop for a major decline in equities."

Indeed, while the market's rally since October has been impressive — taking it to gains normally associated with bull markets — most of the underlying problems that made stock market investing such a dismal affair in 2011 remain.

For one, there are fundamental issues.

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