Can bulls push S&P 500 into record territory?
Two big retailers' earnings, home price data and consumer confidence could swing market focus back to the economy Tuesday, as traders watch the S&P 500 to see if it will make another run at its all-time high.
The S&P 500 soared above 1850 Monday in a surprisingly sharp rally that temporarily drove the index to a record intraday high above 1858. However, in the final hour, stocks fell from their highs, and the index finished at 1847, below its record close of 1848 set on January 15.
"The late day sell off is a message," said Paul LaRosa, chief market technician at Maxim Group. "We really need to close over that 1850 [level], and we fell short. It just could mean this near-term rally is extended." He said the Dow, which also closed well off its high, failed to close above a key level. The Dow was up 103 points at 16,207.
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"The Dow has 16,588 as the high… 16,225 would have been a good sign. That fell short of its near-term resistance," he said. "We're still a little bit cautious. We had an outside day in the markets last week which is usually a sign of selling in the markets. We recovered nicely over the next two days and today. I just think a little bit of caution would be smart."
Some beaten down groups led the market higher, with energy the best performer, up 1.5 percent.
"Traders on both sides of the tape didn't like the way we closed," said Scott Redler, who follows short-term technical moves at T3Live.com. "I feel like you're going to have to get used to it. It's the kind of tape we're living in right now….There wasn't enough follow through to convince the bulls, but we're still at the highs of the year, and there's not much money to make on the short side."
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"There's a lot of things to stick with until they change. As of right now, nothing has changed. We had a five to seven percent correction – the same kind of correction we had in 2013," he said. The S&P also erased all of its losses for the year Monday.
Major companies reporting earnings Tuesday include retailers Home Depot and Macy's, which will be watched for comments on weather impact. Other companies reporting ahead of the opening bell include Toll Brothers, Holly Frontier, American Tower, Domino's Pizza, FirstEnergy and Sanderson Farms. Companies reporting after the close include Dreamworks Animation, Boston Beer, Petrobras, Newfield Exploration and Range Resources.
Both S&P/Case Shiller and FHFA home price data will be released at 9 a.m. ET. Consumer confidence is due at 10 a.m. There is a $32 billion 2-year note auction at 1 p.m.
Natural gas, which rallied hard last week, plunged 11 percent Monday, its biggest drop in more than six years. Natural gas was bid up above $6 per million BTUs last week on the threat of more cold weather. The March contract expires Wednesday. Natural gas for March fell $0.69 to $5.445 a million BTUs. Some traders had expected gas to continue to push higher into the contract expiration.
(Read more: It's not the weather, stupid, it's the economy!)
But MacNeil Curry, global head of technical strategy at Bank of America Merrill Lynch, wrote that he thinks the uptrend in natural gas is exhausted for now.
"We are long-term bulls on Natural Gas, with continuation charts targeting 7.33/7.80. HOWEVER, FOR NOW, IT'S TIME TO MOVE TO THE SIDELINES, AS A MEDIUM-TERM TOP IS AT HAND," he wrote, adding that the $6.41 level is resistance. "Look for prices to pull back toward 4.54/4.33 before the long-term bull trend can resume."
—By CNBC's Patti Domm. Follow her on Twitter