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NEW YORK (Reuters)-a bounce could be in the cards for stocks next week as bulls defending the key technical level of purchasing managers and district winners to shore up their books.
But the gains coming from healthcare, staples or other defensive sectors that have outperformed the market over the past few months several only have supported the idea that the u.s. stock market needs to complete its phase correction and selling panic must occur before a more sustained comeback.
"We want to see more fear," said Ari Wald, equity strategist at Brown Brothers Harriman in New York.
But be careful what you wish.
Sources of decline recently, including slow March of Greece to a default on its debt, weak economic data from the United States and the term creeping to lift the U.S. debt ceiling, are far from being solved.
TAKING the 200 DAYS SHOWS the WAY
Despite a decline that dragged the S P 500 & as 8.2 percent under his three-year high hit in early may, the index held above its 200-day moving average-a great line in the sand as the bulls and the bears battle for control of the market.
The slide had been telegraphed for weeks and performance by-the-book market--pulling back to a level widely followed-it seems too good choreography to some analysts.
"The fact that we went to day-200 ... it just seems a little too perfect," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co. in San Francisco.
He said the timing of the movement was favorable, as the market creates a technical basis before resuming its upward move on the back of strong gains.
"You could get an attempt of a shakeout," said Pado. "But sometimes the majority is right".
Even if they are right, do not seem too convinced. So far this quarter-on track to be the first in red for S & P 500 in the last year-daily volume on the New York Stock Exchange, NYSE Amex and Nasdaq has averaged 7.22 billion shares.
That is down to 7.94 billion shares traded daily during the first quarter, when the S P 500 earned & 5.4 percent. Commitment to the market has waned. Frantic selling, washing down of day traders seems absent so far this corrective phase.
Despite the firm above that level, the market has not removed the danger zone of dipping below its average of 200 days. The curve has a steep slope, as the S P 500 & took about two years to score a progress of 100 percent from its March 2009 lows.
The 200-day moving average now stands at 1, 263.47, less than 0.4 per cent under close to S & P 500 Friday.
"Whenever there is a resistance or support level, become weaker," said Nicholas Colas, Chief market strategist of ConvergEx Group in New York. "It's almost like a piece of metal. Every time you hit, it grows more fragile, and that's why people are really concerned about the third or fourth time. "
After three straight days of decline, S P 500 fell & 0.24% for the week and finished at 1, 268.45-its seventh decline in the last eight weeks.
The Dow industrials (.DJI 0.58%) lost for the week, closing on Friday at 11, 934.58, while the Nasdaq Composite (.IXIC) rose 1.39 per cent for the week to end at 2, 652.89.
The next two weeks, before the start of the quarterly earnings season, could be seriously affected by wild fluctuations such as those seen recently. Thursday, after a favourable market outside of Greece, S & P 500 posted his return stronger in almost a year, in the days when the benchmark fell more than 1 percent.
From its session low Thursday, S & P 500 climbed more than 20 points in closing. Dow swings covered 233.79 points from its intraday low to high session on Thursday.
But buying interest waned Friday. In addition to doubts about the passage in Parliament of Athens of higher taxes and cuts, weak Italian banks are also scare off investors.
The Federal Reserve on Wednesday gave a bleak Outlook on the economy, lowering its GDP growth forecasts for 2011 and 2012. And the Fed Chairman Ben Bernanke found difficult to explain the sources of a so-called economic "soft patch" that seems to have become pervasive.
SUMMER STORM DATA
Beyond the numbers weekly jobless claims, housing and production data will be more attention next week.
The index of prices of houses S & P Case-Shiller April Tuesday, and the National Association of Realtors pending home sales for may on Wednesday could confirm the double dip of the real estate market.
Factory activity grew in May to its slowest pace since September 2009, according to the Institute for Supply Management, and ISM numbers Friday for June is expected to drop to 51.9, indicating an even slower growth rate.
New applications for unemployment are expected to land Thursday over 400,000 for a week 12 straight, according to economists surveyed by Reuters.
Personal income and consumption, out Monday, are expected to tick higher in the month of May. Consumer confidence, out Tuesday by the Conference Board, is forecast at a June reading of 60.5, just a touch lower 60.8 may, showed a survey by Reuters. Despite a recent string of weak data in the month of may, a sharp drop in crude oil prices Buoy consumer confidence.
(Reporting by Rodrigo Campos; Further notification from Edward Krudy; Editing by Jan Pasquale)
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