NEW YORK ( TheStreet) -- The major averages are flirting with critical support levels, and it remains to be seen whether bulls will swoop in to defend them.
"The major averages are at a critical inflection point as they are all flirting with their respective 50-day moving averages lines," says Adam Sarhan, founder and CEO of Sarhan Capital. "Ideally, the bulls will show up and defend that level and send all the major averages decisively above their respective 50 DMA lines next week."
The bulls' decision will be dependent on various factors, but the overriding concern will be the broad outlook on the global economy: whether it's going to grow or contract six to 18 months out.
Their decision will also be influenced by whether the Federal Reserve and other central banks help stimulate economic growth with further quantitative easing or other programs.> > Bull or Bear? Vote in Our Poll Every data release "is another piece of the puzzle," says Sarhan. Any data point that supports weaker economic conditions could drive the bulls away from defending their important, 50-day moving average line of support, he says. On the other hand, in a solid bull market uptrend condition, stocks might still rally on bearish news. "Markets and stocks tend to look past negative data and rally when they are in a solid uptrend," says Sarhan. From mid-December to early April, stocks were up nearly every week, even on "bad" data, he points out. Sarhan says four domestic areas are likely to drive stocks next week: housing data (including the Standard & Poor's Case-Shiller home price index, new-home sales and pending home sales); Wednesday's announcement from the Fed policy meeting; gross domestic product numbers on Friday; and earnings. One of the most highly anticipated earnings reports will, of course, be from Apple (AAPL - Get Report), which now accounts for about 19% of the value of the Nasdaq 100. Although all anecdotal evidence suggests Apple will top its already lofty estimates, Sarhan notes that focusing on only the numbers leaves out a very important part of the equation, as the stock has fallen many times in the past after reporting stronger-than-expected earnings.