It could be this week, it could be next week, or it could even be in September.
But no matter when it happens, traders remain convinced the stock market is set up for a pullback that could take it another 10 percent or so lower before it can start to really move higher.
Stocks bounced back Tuesday after Monday's global selloff. The Dow was up 82 at 9217, and the S&P 500 was up 9 points, or 1 percent at 989. Financials, materials and technology led the gains.
The dollar weakened, and many commodities were higher, including oil and gold. Oil made a more-than-5-percent move, jumping above $70 in the late electronic session on API's report of tighter-than-expected inventories. Treasurys saw selling along the curve in light volume trading.
Investors Wednesday will focus on Hewlett Packard's better-than-expected earnings report and raised forecast, released Tuesday after the bell. The shares weakened, though, as Hewlett said its sequential revenue would be up about 8 percent in the fourth quarter, less than analysts' expected.
There is no U.S. economic data Wednesday, and there are just a few earnings including Deere, ahead of the bell, and Limited Brands, NetApp and Petsmart, after the close.
Retailers Home Depot and Target both reported earnings that beat expectations, giving a boost to stocks Tuesday as data on housing starts disappointed with a surprising decline.
Stocks Tuesday performed surprisingly well, but the rally stalled at a key technical point.
"(The S&P 500) rallied right back into the resistance area and they didn't push through," said Art Cashin, director of floor operations at UBS. "I think they did some damage technically, and we'll see where they go from here."
Cashin puts the resistance level for the S&P 500 at 989 to 994. He said there was support at 968 to 972.
Cashin sees two possible scenarios for the market as the summer winds down.
"This has the potential to be a very difficult autumn. We're going to do one of two things. We're either going to have a sharp pullback later or we're going to have a shallow pullback here, then a head fake rally and then a bigger pullback later," he said.
Byron Wien, soon to be chief investment strategist at Blackstone Advisory, said on "Squawk Box" Tuesday that he believes the market is in a healthy consolidation mode.
"I don't think we should be frightened by the pullback. I think it was time. Late summer...people are away. People were too optimistic. We've got to convert some of that to pessimism, but the process of doing that doesn't discourage me that the market could do better between now and year end," he said.
He said the market could decline another five to 10 percent. "I'm also not losing my nerve on thinking the market could work its way higher," he said.
In an interview as he left the "Squawk Box" set, Wien acknowledged September could be difficult, as many traders believe. But he said he bases that view on fundamentals, not on historical anecdotes that September is the worst month of the year for stocks.
"Historically, it's been rocky. It could be. I don't believe in the mechanicals," he said. "... If I'm right, October through December could be pretty good."
Markets were encouraged Tuesday by Germany's ZEW survey, which showed financial professionals there more optimistic in August. The index rose to a better-than-expected 56.1 from 39.5. The survey follows on positive German and French gross domestic product (GDP) data last week, which showed both countries with slightly positive growth in the second quarter, while economists had expected to see contraction.
Wien said other parts of the world -- China for one -- are beginning to recover more quickly than the U.S. "It is a positive. The U.S. can't operate alone," he said.
More signs of cross border recovery came from companies Tuesday. Hewlett Packard said it sees double-digit revenue growth in China. Separately, Cargill told reporters that it sees signs of an economic recovery in some emerging market countries. The company said China has been a big importer of soybeans, but it also said Brazil is showing signs of strength. Cargill is a diversified company in the food and energy businesses and is involved in risk management. It also owns 64 percent of fertilizer company Mosaic.
That same German sentiment report added to selling pressure on the dollar Tuesday. Late in the day, the euro was 0.4 percent higher against the dollar, at $1.4132.
Meg Browne, currency strategist with Brown Brothers Harriman, said focus is on the equities markets and also China, which drove global equities markets Monday.
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"I think we're going to trade sideways for a little bit longer. I think the risk is that the stock market comes lower and the dollar and yen move higher," Browne said.
Treasurys traded quietly Tuesday.
"Stocks are a little less overbought and bonds are a little less oversold. We're beginning to think more about range," said Bill O'Donnell, Treasury strategist at RBS. He said trading is thin, and, like other markets, many of the regular players are away for summer holidays.
"We did see some really good central bank buying in intermediaries," he said, noting activity in the 5-year and 7-year notes. Next week, the Treasury is expected to auction those durations as well as 2-year notes.
As investors look around the world for signs of economic recovery, the U.S. consumer has been one of the most worrisome pieces of the puzzle. Rising unemployment and shrunken household wealth have made the consumer cling to his cash.
But O'Donnell said it is interesting to see just what U.S. households were doing with their money. From recently released Fed data, it appears households (which include schools and other nonprofits) were big buyers of Treasury securities.
"Just in the first quarter alone, holdings of Treasurys rose by $400 billion," he said. In the fourth quarter of 2008, households held $266.6 billion in Treasurys. By the first quarter, the total was $643.3 billion. Part of that was the result of investors moving money away from government-sponsored entities, Fannie Mae and Freddie Mac .
"As we get a new and more elevated savings rate, which I expect us to do, we're almost certain to see a continued rise in household Treasury purchases," he said.
The first quarter holdings of Treasurys by U.S. households was nearly equal to China's $700 billion plus in Treasury holdings.
"There's a new source of private domestic demand. Everybody's been so transfixed by foreign central banks," he said.
O'Donnell said households hold 1.5 percent of marketable Treasurys and savings bonds, and that percentage should grow. At the end of 2007, households had only 0.5 percent, but in 1995, households had 4.5 percent. In the 1950s, that level was 8 percent.
Milton Ezrati, senior economist and market strategist at Lord Abbett, also studied the Fed's flow of funds report and says that the first quarter decline in household net worth was 2.6 percent in the first quarter, equating to an annual rate of nearly 10 percent. That compares to a shocking 30 percent annual rate of decline in the fourth quarter, or an annualized rate of decline of 20 percent.
Ezrati writes that in the six months ending in March, real estate holdings fell at a 12.1 percent annualized rate, while stock holdings fell at a 47.4 percent annualized rate. Mutual funds fell at a 35.9 percent rate. It's no surprise that the only assets to rise during that period were Treasurys, and to a lesser extent corporate and muni bonds.
But households should be helped, starting in the second quarter, by the move higher in the stock market and stabilization in real estate, as well as increases in corporate bonds and muni bonds, Ezrati noted. they are also paying down credit card debt.
He said that households would need to see a more than five percentage point drop in the ratio of liabilities to assets, a correction of almost 30 percent, to return to healthier levels of the mid-1990s. Liabilities to income ratio would have to fall by about 25 percent.
"Given this gap, households seem likely to continue their de-leveraging trend for some time to come, an effort that will surely constrain consumer spending," he wrote.
What Else to Watch -- Swine Flu
Commerce Secretary Gary Locke, Homeland Security Secretary Janet Napolitano and Health and Human Services Secretary Kathleen Sebelius will hold a joint news conference Wednesday at 10 am to announce new federal guidelines to help employers and businesses deal with the flu season.
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