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[color=blue][size=18]Endless summer [/size][/color]

Some analysts believe the market will be stuck in its summer trading range for a while longer.
September 19, 2004: 6:58 AM EDT
By Mark Gongloff, CNN/Money senior writer



NEW YORK (CNN/Money) – After spending most of the summer stuck in a trading range, stocks have been climbing steadily higher since August. But prices have yet to break the upper-end of the range, and some analysts think it will be a while before they do.

Since hitting lows for the year in mid-August, the Dow has jumped 5.5 percent, the S&P has gained 6 percent and the Nasdaq has surged nearly 9 percent. But all three indices are well below the peaks they hit in late January, when the trading range began.

All three have bounced up and down this year, but each subsequent peak -- in April and in June -- has been lower than the previous peak. And each bottom -- in March, May and August – has been lower than the previous low.

If the pattern holds, then the indices are just about at the top of the latest bounce.

"This has been a short-term rally in an overall longer-term bearish environment," said Richard Suttmeier, chief market strategist at Joseph Stevens & Co. "Conservatively, there is less than 5 percent upside potential. If we're fortunate enough to get that, then the average investor should pare back their holdings."

[For a list of the coming week's key events, click here.]

Suttmeier is fairly bearish about the prospects for economic growth, so his belief in a bear market is understandable.

But even some analysts with a more positive view of the economy expect another downtick, even if it's just temporary.

"Overall, the market is a positive one, but I still do think that we're trading-range bound," said Bernadette Murphy, chief market analyst at Kimelman and Baird.

Not all analysts agree.

"The broader indices will go up from here, but there will be roation in and out of sectors," said Mark Watson, president and co-portfolio manager at the Kenwood Group in Chicago.

If Watson's view is right, then some beaten-down sectors that might gain favor include tech, industrials and consumer discretionaries.

If he's wrong, then the market could be at home on the range until at least the presidential election in November, which is widely seen as a big hurdle for stocks.

Meanwhile, the Fed

Traders will get some clues about how the nation's biggest brokerage firms feel about the market's future when Goldman Sachs (GS: Research, Estimates), Morgan Stanley (MWD: Research, Estimates), Lehman Brothers (LEH: Research, Estimates) and Bear Stearns (BSC: Research, Estimates) report earnings this week. All four depend on strong markets, and all four have suffered this year.
Wall Street will have little in the way of economic news to inspire it, with potentially one big exception. Federal Reserve policy makers meet on Tuesday to discuss the health of the economy and to set their target for the fed funds rate, an overnight bank lending rate that influences other borrowing rates in the economy.

The Fed has been broadcasting its intentions with a bullhorn for several weeks, so markets will likely yawn if and when the Fed raises its fed funds target to 1.75 percent.

But the Fed's statement announcing its decision could stir some interest. The current parlor game on Wall Street is trying to figure out whether the Fed will:


take a break from its dogged rate-hiking campaign at its next policy meeting, scheduled for November, after the election;


take that break at the year's last meeting in December, or


not take a break at all.

Perhaps not surprisingly, economists are divided about this, with some seeing the glass as half-full and the economy poised to accelerate and some seeing the glass as half-empty and the economy in for a slowdown. Recent economic reports have given fodder to both camps, and the Fed might want a little more clarity before it decides to announce it will either speed up or slow down its rate-tightening campaign.

"Given the emphasis on restoring 'neutrality' and the committee's expectation of higher growth in the months ahead, the policy statement released after Tuesday's meeting is unlikely to signal any significant shift in the FOMC's tactics or strategy," Goldman Sachs economists said in a note to clients on Friday.

Key events in the week ahead:


Tuesday morning brings the Commerce Department's report on new home construction in August. Economists, on average, believe construction projects were started at an annualized rate of 1.93 million units, down from July's 1.98-million-unit pace, according to Briefing.com.


Fed policy makers begin their meeting at 8:30 a.m. ET, and announce their interest-rate decision at about 2:15 p.m. ET.


On Thursday morning, the Conference Board, a private research firm, will release its index of leading economic indicators for August. Economists expect the LEI to fall 0.2 percent after falling 0.3 percent in July.


Also Thursday morning, the Labor Department will release the number of new claims for unemployment benefits in the week ending Sep. 18. Economists expect claims to edge up to 338,000 from 333,000 the prior week.


Friday morning, the Commerce Department will release its August figures for orders of durable goods, products manufactured in the United States meant to last three years or more. Economists expect orders to fall 0.3 percent after rising 1.6 percent in July.


Later Friday morning, the National Association of Realtors will report on sales of pre-owned homes, the biggest part of the housing market, in August. Economists expect the annualized pace of sales to slow to 6.6 million units, compared with 6.7 million in July.