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Market pros advise caution, but buyers keep coming

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Given the number of Wall Street pundits who are flashing caution lights on the stock market after five weeks of gains, it’s a wonder share prices aren’t collapsing today.

Then again, this is exactly what the market loves to do: confound the consensus view.

Major indexes are up from their morning lows. The Standard & Poor’s 500 index was up 4.65 points, or 0.5%, to 861.21 at about 12:25 p.m. PDT, after falling as much as 1.3% in early trading.

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The S&P climbed 26.6% from March 9 through Thursday, the biggest 23-day advance since May 1933, according to S&P index analyst Howard Silverblatt.

The surge in the small-stock Russell 2,000 index in that period was even steeper -- 36.4%, the fastest rally in the index’s 30-year history, according to Bloomberg News data. That exceeded even the heady gains in many emerging markets overseas since March 9 (including Russia, up 31.3%, and India, up 34.4%).

The speed of the market’s ascent has many Wall Street pros screaming, ‘Too much too soon!’ In technical parlance, the market is considered to be heavily ‘overbought.’ I noted Bespoke Investment Group’s concerns in this post last week.

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The standard advice now is: Wait for a significant pullback.

Bloomberg today reports on the caution of market veterans such as Laszlo Birinyi, head of Birinyi Associates in Westport, Conn.:

Mistaking a temporary jump for a sustained bull market can be costly. In 41 so-called bear market rallies since 1928 -- gains of more than 10% that are later wiped out -- equities fell an average 25% after peaking, according to Birinyi. ‘Buying stocks [now] is like crossing Fifth Avenue when the light is red,’ Birinyi said in an interview with Bloomberg TV. ‘You might make it, but the odds are not with you.’

Then again, if enough people take to the street, they can dictate traffic patterns. Today, buyers still are holding sway, despite analysts’ advice to head for the sidelines.

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-- Tom Petruno

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