Stocks Start to Hit a Wall: Here's What You Can Do

All of the good things that happened in the stock market this week weren't good enough.

Despite a string of mostly positive economic reports, strong retail earnings and a week-ending shock of good news for the housing market, stocks appear to be hitting a wall and could start moving sideways in the coming weeks.

Kathy Willens / AP

The major averages all showed major improvement this week, with the Dow gaining more than 1.9%, the S&P 500 up nearly 2.7%, and the Nasdaq ahead more than 3.4%.

But the averages have been hitting the top of their 200-day moving averages and are having trouble breaking through. That was evident Friday, when stocks made little headway and closed flat.

All this indicates to analysts that the market may trade within a range that will be hard to break without even more good news surprises.

"I personally would start taking money off the table," says Dave Rovelli, managing director of US equity trading at Canaccord Adams of Boston. "I wouldn't chase the market after the move we've had with the resistance in front of you."

Rovelli watches the technological side of the market, and he sees opportunity there for investors seeking safe stock plays while Wall Street spins sideways. He likes Blackberry maker Research in Motion and iPhone and iPod manufacturer Apple as two companies carving out new niches in the market that have strong appeal.

But even with those two companies, he said he would only buy after their stock price has dropped, a play-the-dips strategy he advises with the broader market, which he doesn't see having much room to the upside.

"You would need a lot of volume and the volume isn't there," Rovelli says.

Among the most often-cited fears for the market ahead are skyrocketing oil, potentially more trouble for financial institutions, food inflation that is weighing on consumer spending and the lingering problems in the housing market.

On the positive side, the market did survive a busy news cycle and a strong surge up with only what appeared to be a modest sell-off Friday. Volatility, a hallmark of the market's slump that began last September, has all but vanished as the Chicago Board Options Exchange's Volatility Index has dropped to levels not seen since early October.

And there are some who believe better times are yet to come.

"What the market has to start with is some positive psychology and some momentum on the upside, and this was a very constructive weak for that," says Charles Massimo, president of CJM Fiscal Management. "You started to see a rash of money come into the market, though not nearly as much as I'd like to see for a full turnaround."

CONTINUED : Playing the Market: Bonds, Bear Funds, Health Care

---

1 | 2 | Next >