Coming Week: Test of Nerves

Buying opportunity or beginning of a serious decline?

That's the question on traders' minds in the wake of last week's global market upheaval, which reminded investors that -- all together now -- it's a small world after all.

The reaction to China's selloff and concerns about an unwinding of the so-called carry trade amid the yen's rally were stark reminders of the interconnectedness of global financial markets. They also reflect the folly of trying to forecast major market moves, because it's usually the issues people aren't worried about that prove most caustic to portfolios.

To wit, last week I correctly forecast "more weakness afoot," but didn't accurately predict the trigger for the selling.

That said, a number of scheduled events are likely to dictate trading in the coming week, including speeches by Federal Reserve Chairman Ben Bernanke on Tuesday and other Fed officials throughout the week; Monday's ISM services index for February, Wednesday's beige book report and Friday's U.S. jobs data.

Beyond our borders, German industrial production data and policy announcements by the Bank of England and European Central Bank are each due on Thursday.

Another 25 basis-point ECB rate hike is widely expected following ECB President Jean-Claude Trichet's reference to the need for "strong vigilance" in February, write Credit Suisse economists Maxine Koster and Kathleen Stephansen. "We do not think recent financial market turbulence will cause the ECB to change tack, [but] Trichet is likely to be at his most opaque in the question and answer session following."

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