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Despite the two-day pullback this week, the S&P 500 (NYSE: SPY) begins "hump day" with a gain of 25.36 percent so far in 2013. And yet, everybody - yes, even those in the bull camp - seems to be more than a little nervous right about now.

The Bears Should Be Nervous

For all of those who have been coming to work each day with their bear hats donned, it isn't surprising that they might be a tad uncomfortable at the present time.

The major indices are at all-time highs. The economies of the globe are improving. And the calamities that were prognosticated to occur at the beginning of the year have failed to materialize. So, instead of a 20+ percent gain, the glass-is-half-empty crowd may not have much to show for the year. Nervous indeed.

The MPT Crowd is Definitely Nervous

Next up, anyone using those fancy diversification strategies that have become all the rage lately (which, by the way are based on a heaping helping of hindsight) has been introduced to the term "diworsification" this year. In short, the U.S. stock market has been the place to be in 2013. And the idea of diversifying your portfolio across the bond markets, emerging markets, gold, etc hasn't been helpful - at all.

Bonds, which have been the safe haven and a great way to generate consistent returns for as long as anyone can remember, look like they are morphing from bull to bear. As such, all those folks leaning on their bond portfolios have been sorely disappointed.

The bottom line for anyone subscribing to that Nobel Prize winning MPT thing, as well as the advisors who are promoting such an approach, is that they might be feeling more than a little queasy about their strategy here.

But the Bulls?

Then there are the bulls. What's not to like, you might ask. Stocks are up big. The Fed is friendly. Earnings are at record highs. Inflation is low. Rates are still VERY low. And the trend is your friend. So, why on earth would the bulls be nervous?

The answer is really pretty simple.

If you are a buy-and-hope investor, the term "fat, dumb, and happy" likely applies right about now. However, for anyone looking to extract profits from bull markets and then avoid the pain and destruction of bear market periods, the 2013 joyride to the upside may be posing a serious dilemma.

You see, unless one employs a disciplined approach to their investing strategy, they were unlikely to have enjoyed the big gains that have been available in the stock market this year. The key is to understand that this move was an easy one to miss.

Unless you were able to blindly pull the trigger and make some moves that likely felt pretty uncomfortable at the time (the best ones usually do), you may have decided to play it safe on several occasions. It may have felt better to wait for "proof" that the market was for real before committing capital. But as history has proven time and time again, waiting proof in the stock market can be very expensive.

The point is that a great many investors who may currently be "long and strong" haven't gotten all of the gains from this year's bull run.

Reasons To Be Nervous

Anyone who came late to this year's market party, may indeed be starting to feel a bit nervous. Here's why. The bull market is getting old. Valuations are starting to move into, or at the very least towards, the expensive zone. Divergences are starting to crop up. Sentiment indicators have been flashing yellow (if not red) lights for a while now. Corporate revenues haven't been improving at the same pace as earnings. The economy is still muddling forward at a painfully slow rate. And the Fed will have to turn off the QE spigot at some point.

To be sure, the stock market can continue to go higher. Remember, bull markets can and often do move much farther and last longer than anyone can imagine. However, given the extended nature of the bull market and the fact that algos can move the market in a hurry these days, it wouldn't take much to get a dance to the downside started. And if there was a decent reason behind the decline, well, some damage could be done.

So, despite the fact that stocks are enjoying the best year in the last fifteen, investors may be getting a little skittish at this time. Therefore, it is probably a good idea to dust off those risk management strategies as 2014 approaches. Because you just never know when something might come along to get the bears riled up.

Turning to this morning... Ben Bernanke is back in focus this morning. In a speech at the National Economists Club last night, the Fed Chairman said the FOMC will keep rates low for as long as necessary but that the effectiveness of QE diminishes as the size of the Fed's balance sheet rises. In addition to Bernanke's inputs, traders will get some economic data to review this morning as reports on CPI and Retail Sales will be released. Finally, we will get the minutes from the latest Fed meeting this afternoon.

Positions in stocks mentioned: none

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