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Market Preview: Retrace or Retreat?

Tickers in this article: HLF SPY ^DJI ^GSPC WMT ^IXIC ARO

NEW YORK ( TheStreet) -- Where you think the U.S. stock market ends up this year likely depends on your view of the current action.

Or more precisely, the determining factor could be viewed as which of these 'R' words you think is most accurate in describing the near-constant selloff in equities since the calendar flipped over to May: Retrace or retreat.

John Stoltzfus, Oppenheimer's new chief market strategist , is in the retrace camp.

"The current pullback in stocks continues to appear to us as an orderly pullback or more accurately a 'giveback' after stocks had a sizable run-up from last October through early April this year that found stocks looking like they'd gotten ahead of themselves and the economy," he wrote earlier this week. "For now we look for market choppiness to persist as investors with positions holding outsized gains from the run-up take some profits and rebalance portfolio positions for new opportunities.

He continued: "The ongoing period of retracement will likely end when the pace of economic growth and earnings reasserts itself, which we believe will occur in the second half of the year."

That view seems, well, a bit too orderly, given the messy drama playing out in Greece and the rest of the eurozone, but there's no denying that at least some of the selling is related to profit-taking spurred on by the negative turn in the headlines from across the pond.

But beyond the eurozone's woes, those in the retreat camp can also point to the softening in U.S. economic data of late, the upcoming end of Operation Twist in June (with no sign of QE3 in sight unless the recovery really starts to flag, which can't exactly be called a positive for stocks even if it does bring about a refill of the punch bowl), and the so-called fiscal cliff looming at the end of this year unless Congress can find a way to cooperate during a presidential election year.

Oh, and earnings estimates continue to decline with analysts now projecting year-over-year profit growth of 7.8% for the second quarter, down from an estimate of 9.2% as of April 1.

Judging by the minutes of the Federal Open Market Committee's last policy meeting in late April, there's definitely some central bankers who are worried. The minutes, released Wednesday afternoon, warned of the potential for a "sharp" fiscal tightening at the start of 2013 if a budget plan isn't hammered out, saying this possibility poses a "sizable risk."

Oppenheimer's Stoltzfus has a year-end price target of 1450 for the S&P 500 , a level that represents upside of more than 9% from Wednesday's close at 1325.

The main argument of the retrace crowd is that the U.S. will be fine with the economy and earnings on an upward trajectory and that should trump whatever gyrations Europe experiences.