Consolidation Time - 02/23/10

Away from market technicals and economic views, there are fewer and fewer longs that are meeting my standards of value today.

Accordingly, my long book is at a minimum level now.

These conditions and my gut feel suggest that it might be time for a consolidation in the U.S. stock market, even despite the impressive price momentum.

As I wrote in yesterday's opener, in my "20 Surprises for 2010," I expected above-consensus fourth-quarter 2009 earnings and first-quarter 2010 profit guidance to elicit limited market response. Earnings and revenue in the fourth quarter exceeded consensus expectations.

My surprise that the market would be flat during the first three months seems, thus far, to be right on the mark, as the averages are flat year-to-date. I remain of the view that the S&P 500 will be stuck in a trading range between 1,025 and 1,150 for the next six to nine months.

With stocks currently at the higher end of that range, I suspect a slow downward move back toward the lower end during the month ahead.

Let us not lose sight that stock peaks typically occur during good news (e.g., the better-than-expected sales/profits) and, conversely, stock bottoms typically occur during periods of bad news (March 2009).