The S&P 500 this past week closed above its 200-day moving average of 1113, but then slid below it. "It doesn't really tell you much about what's going to happen with the fundamentals. I guess that we're sitting at that point where it's going to lead to volatility as we bounce under and over it. There's a good chance we go back over it., but I think that we probably go back under too," said Freeman of the 200-day.

"I think if we don't see some more pullbacks between now and the middle of October, and it looks like investors are feeling better by that period of time, we may have passed through an important period of risk there. Between now and the early part of October, if the seasonal factors and fears of slowing aren't born out in the data we're getting, we may be getting ready to create that second leg up already," he said.

AP

"Our target is still 1100 to 1140 (on the S&P 500) at the end of the year, and I don't think we're going to see it in a straight line," said Freeman.

In the past month, 20 companies in the S&P 500 increased dividends, according to Standard and Poor's. That compares to just eight in the same month last year.

"Yields are so low by historical standards that (dividend yields) are higher than the 10-year Treasury, which you don't get often," said Jack Ablin, CIO of Harris Private Bank.

Ablin has been cautious on the market ever since the S&P fell 5 percent below it's 200-day moving average on June 8.

"Actually, I wouldn't mind if you just clip a dividend and keep your head down," said Ablin. "What we're seeing is in this kind of market is go for dividends right now and growth. It's possible it could come from some other place, but at this stage, dividends to me have a much higher degree of certainty than the prospects for higher revenues."

Ablin said there is a chance the market could surprise on the upside. "It's one of those things where from a technical standpoint, if we break out we're going to add some risk. But we're likely to do it in some place out of the way, like real estate, not equities. Aside from that, I don't see a huge catalyst to the upside unless all of a sudden these temporary jobs turn into full time jobs," he said.

Treasurys this past week saw yields in some durations gap to record levels against the 30-year bond. The gap between the 10-year and 30-year yields reached 110 basis points at one point Friday. It had been about 90 in the spring. The yield on the 10-year was at 2.91 percent Friday, while the 30-year was at 3.99 percent, down from 4.03 percent a week earlier.

"The market could clearly be vulnerable to stronger data at these yield levels," said John Briggs, Treasury strategist at RBS. He pointed to the surprising strength in Chicago Purchasing managers data Friday.

"It will be interesting to see if the ISM confirms that. Chicago was the first growth indicator that went the other way," said Briggs, noting if the ISM confirms that story it will surprise the market.

The dollar was down 0.89 percent on the week against the euro, and is down 6.2 percent for the month, at a level of $1.3033.

"The dollar is the only constant mover this week," said Brian Dolan of Forex.com. "We can see some stabilization and consolidation, but the risk is the dollar breaks down further and we see more dollar weakness on data, and just on flows."

What to Watch

In addition to U.S. data, investors will be watching China's PMI, released overnight New York time on Sunday. There is also a speech on the economy from Fed Chairman Ben Bernanke Monday.

Bernanke's topic is challenges for the economy and state governments, and he speaks at 10:15 a.m. New York time before the Southern Legislative Conference annual meeting in Charleston, S.C. Treasury Secretary Tim Geithner also speaks Monday afternoon, on financial reform at New York University's Stern School at 4 p.m.

Other important reports include ISM manufacturing data Monday and ISM non manufacturing Wednesday. Both of those reports hold a key employment component.

Personal income is released Tuesday, and consumer credit is reported Friday. Economists will be watching monthly auto sales Tuesday and chain stores' monthly sales Thursday for clues as to the consumers' willingness to spend. ADP's employment report is Wednesday and weekly jobless claims are Thursday. Pending home sales are reported Tuesday.

The European Central Bank and Bank of England hold rate meetings Thursday.

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