Coming Week: Test of Nerves

Meanwhile, Saks' (SKS Quote) results could be the most important, given the outsized influence of high-end consumers on overall consumer spending. I made a similar case here about Nordstrom's (JWN Quote), although its disappointing results were overshadowed by last week's macro dislocations.

Beyond retailers, a relatively quiet week of earnings also features results from Hovnanian (HOV Quote), National Semiconductor (NSM Quote) and Goldcorp (GG Quote).

Fearless Predictions

Levkovich is generally sanguine about the market's volatility and upbeat about intermediate-term prospects for stocks. The market, he says, is historically up 80% of the time three months after corrections of 3% or more. Tuesday's wild selling suggested a "cataclysmic crescendo" rather than the start of a bigger correction, he says, as detailed in Friday's "Real Story" podcast.

The strategist also refuted the idea market participants are overly complacent about last week's events. "A week ago people said there was complacency, but that's a moot argument today," he says. "Everyone is deeply on guard now."

By his own admission, Levkovich is "not worried about the next day or two." For those who are, I direct you to the comments in Thursday's podcast by Dennis Gartman of The Gartman Letter, who is forecasting near-term weakness of another 4%-5% in major averages and is short the Nasdaq 100 Trust (QQQQ Quote) in anticipation.

While not actively short, Cody Willard, president of CL Willard Capital and a RealMoney.com contributor, expressed similar near-term caution in an interview for TheStreet.com TV on Friday.

Another note of caution: Tuesday's drop brought the Dow Jones Industrial Average below its simple 50-day moving average of around 12,500 for the first time since August. Basic technical analysis suggests any near-term rebound will face resistance at that level. A failure to break through would then likely lead to a test of its 200-day moving average at 11,782.

Comparable levels are 1430 and 1344.50 for the S&P 500, and 2455 and 2287 for the Nasdaq.

For all but the most aggressive traders, prudence therefore dictates letting these technical moves play out or waiting for signs of stabilization before declaring the proverbial coast clear.

1 What would best describe your stance heading into the coming week of trading? Bullish Bearish Neutral 2 Which of these sectors do you think is set to move up in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities 3 Which of these sectors do you think is set to move down in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities View the results without voting