Market Insider

Published: Friday, 6 Nov 2009 | 8:08 PM ET

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Stocks could side step temporarily as investors look for the next catalyst that will break the market out of its current range.

A last blast of third quarter earnings news is expected this week, including from consumer-driven companies like Disney

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[DIS  Loading...      ()   ] and major retailers, like Wal-Mart

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[WMT  Loading...      ()   ], Nordstrom

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[JWN  Loading...      ()   ] and Macy's

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[M  Loading...      ()   ]. The economic calendar is relatively light, but a group of Fed speakers could get some attention. There is also $81 billion in Treasury note auctions scheduled in a holiday-shortened week for the bond market.

Photo: Oliver Quillia for CNBC.com Traders on the floor of the New York Stock Exchange.

Stocks shook off a two-week losing streak in the past week, with the Dow gaining 3.2 percent to 10,023. The S&P 500 was up 3.2 percent to 1069. The dollar was weaker against a basket of currencies and down 0.9 percent against the euro to a level of $1.4845 per euro. Oil was up 0.8 percent for the week to $77.65, but gold was the standout, finishing the week at a record $1095.10 per troy ounce, a gain of 5.3 per cent.

Traders say they expect intra-day volatility to continue, but the stock market is calmer than it was at the start of the week. For one, Wednesday's Fed statement reassured investors that the Fed would hold rates at extreme lows for some time, maintaining a positive environment for equities for now. They also point to the market's ability Friday to make small gains after the October employment report showed a surprise jump in unemployment to 10.2 percent.

"I think we're going higher," said Andrew Burkly, technical strategist at Brown Brothers Harriman. "We took our rating down a couple of weeks ago, and said we think we'd see between 1130 and 1040 (on the S&P 500). We tested the low end of that banner at 1040 and we're on our way back up."

Burkly and other analysts said the market is hyper sensitive to economic news. "The big battle right now is that people are just concerned about how sustainable the recovery is going to be," he said. "...Trading is definitely going to be pretty volatile. It's a pretty wide range we're using. I think we're going to sees that back and forth a couple times over the next couple of months."

PNC's Bill Stone said he remains "cautiously optimistic," but he agrees its the data that will drive the market for now as investors search for signs the recovery is sound. "What are the markets watching for? ... Indications the consumer might be coming back, and the second one is jobs."

"We still believe as this "less down is the new up" employment trend continues, we will finally see positive employment growth in the first quarter of next year. This should support our case for the sustained economic recovery and stock prices," he said in a quick note after Friday's jobs report.

Raymond James chief investment strategist Jeffrey Saut said he was hoping the market would have pulled back further to provide a buying opportunity. "I do think we're going to be higher. I do think earnings are going to keep coming in better than most people think, and the carrot before the horse for underinvested portfolio managers is going to be those earnings," he said. Saut has a target of 1200 to 1250 on the S&P, the level it was at before Lehman failed in September, 2008.

Saut said one of his favorite indicators is showing a positive trend for stocks. "The number of stocks above their 50-day moving average went from 90 percent in September to 32 percent. Even without having any big correction, you have corrected some of the excesses," he said.

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