Generally, if Bill Gross talks, people listen. If you don’t know who Bill Gross is, he is probably the nation’s most famous bond investor as well as manager of the largest mutual fund manager.

Late last week, Bill Gross said in a statement, “there are stretches in the economy that aren’t sustainable.” When he talks, people listen.

For quite some time, large amounts of money has remained on the sidelines as mutual fund managers have been waiting for a pullback to put that money to work. Of course the issue is that while they have been waiting the market has not pulled back any more than about 7%.

Art Cashin, floor manager of UBS said Friday that if the Dow goes up another 1,000 points, “head for a bomb shelter.” The battle between the bulls and bears is so apparent, you can also see them running across the floor of the NYSE. You can see it every day as the market ticks up and then back down. The market swings are often furious as the bulls and bears battle.

There are very few people who believe that there are good economic reasons for the market to run up almost 40% in 3 months. Just as oil ran up to $147.27 with no fundamental reason, so has the market. Many of the nation’s best thinkers believe that the market will eventually suffer the same fate as oil. As Gross said, the expansion of the economy may not be sustainable in the long term.

If you want my prediction, here it is: I believe the market will correct as second quarter earnings begin to emerge. Everybody found a newfound sense of optimism when earnings came out that were “less bad” rather than good. Second quarter earnings cannot simply be less bad and there is a good chance that they won’t be great. This may bring us all back to reality and the short sellers will be at the ready.

As Warren Buffett says, be fearful when others are greedy and there is certainly a sense of greed in the sense that very little in the way of bad news is bring down the market. As emotional as we were when the market was in a free fall, the emotional rocket ship that we’re on now is equally ungrounded in fundamentals.

Keep your optimism and portfolio in check.<–>