Stocks Could Stay In a Range

If you're ready for stocks to pull out of their trading range and move higher, you might be waiting a while longer.

After so much volatility in recent weeks, many investors are hoping the markets will calm down and recover going forward, but a number of experts believe there's a lot more churning to be done.

"I just think it's going to take a lot of time to work through all the problems out there," says Stephen Carl, head trader at Williams Capital. "We're mired in a range."

He notes that the Federal Reserve's 50 basis-point cut in its target funds rate last week, to 3%, "was what everybody was expecting," so it didn't give the market much of a bid upward.

"The news isn't going to get much better over the coming weeks, and the market will retest the low it recently had," says Tony Dwyer, equity market strategist at FTN Midwest Research.

"The Fed easing, businesses spending and credit-market stabilization help to put in a low, but it's going to take a while for the bottoming," he says. "I'm still looking at corporate spreads, and I want to see improvement.

"Volatility is going to continue, definitely -- high volatility without a lot of progress," Dwyer continues. "The unwinding of global growth is going to be a problem" as the U.S. economy weakens.

This past week, the Dow Jones Industrial Average climbed 4.4%, and the S&P 500 added 4.9%. The Nasdaq advanced 3.7% over the five sessions.

Dwyer says his firm is overweight informantion technology and health care, and leaning positive on financials and consumer discretionary names.

He isn't the only one who expects stocks to retest their lows. Greg Collins, CEO of Fountain Hill Investments, also thinks it's likely.

"We have risen 10% off the intraday low on the S&P in a relatively short time frame, primarily because the markets were extremely oversold at the low and further fueled by a great deal of short-covering," Collins says. "If the markets break the low of 1310, it likely means the credit markets have deteriorated further and that, coupled with a break of the bullish trend from 2003, could spell further trouble for the equity markets."

He also says "developments regarding the problems with the bond insurers ... are truly important at this time." Talk about a bailout of troubled bond insurer Ambac(ABK Quote - Cramer on ABK - Stock Picks) by a group of major banks is one of those, and any rollout of a deal is likely to get a lot of attention from market watchers.

Still, some people think that things might be getting better from here.

"I think the market's going to calm down a bit, and we won't see [the recent] level of volatility, which has been extreme, over the next couple of months," says Joe Keating, chief investment officer of First American Asset Management. "When you do get a bit of a selloff, it's probably a good time to put in some money. You've got to be looking hard at some of the most beaten-up sectors," which he says include high-quality financial companies and telecom stocks.

Market watchers will also be following developments related to Microsoft's(MSFT Quote - Cramer on MSFT - Stock Picks) $44.6 billion bid for Yahoo(YHOO Quote - Cramer on YHOO - Stock Picks), which was made public Friday. The deal could change the landscape of the entire tech sector, and in particular, the interplay of those companies with rival Google(GOOG Quote - Cramer on GOOG - Stock Picks) will be of interest.

On the earnings front, Dow component Walt Disney(DIS Quote - Cramer on DIS - Stock Picks) reports on Tuesday, with PepsiCo(PEP Quote - Cramer on PEP - Stock Picks) Thursday and telecom giant Alcatel-Lucent(ALU Quote - Cramer on ALU - Stock Picks) announcing on Friday.

Exchange companies CME Group(CME Quote - Cramer on CME - Stock Picks) and NYSE Euronext(NYX Quote - Cramer on NYX - Stock Picks) both report on Tuesday.

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