There is nothing quite so frustrating as when Wall Street seems bent on fulfilling prophecies. And damned if that isn't what it feels like these days.

Sure, it was nice on the way up, when stocks rallied up on the heels of the June

Federal Open Market Committee

meeting, breaking out of the range that had held them for three months. Just like the script said:

Fed

hikes; with rate worries taken care of, people turn to earnings, which will be good; market hits new highs.

The problem is that there was always a second part to the script, that the market would do that too-far-too-fast thing it's done the last couple of Julys, and that some kind of correction would follow. Everybody and his uncle knew that you were supposed to pile into the market on the Fed announcement, and everybody and his uncle knew that you were supposed to pile out of the market before

Alan Greenspan

gave his

Humphrey-Hawkins

testimony.

And so here we are, wondering if things will keep on following the script, if the market will have yet another big October selloff, at which point it will be time to get back in.

For Stanley Nabi, chief investment officer at

DLJ Investment Management

, the idea that stocks will sell off like they did in 1997 and 1998 is a bit excessive, but he will readily admit that they have further to fall. His reason is twofold. First, with the bulk of earnings out of the way, a positive has been removed from the market -- there will be no more bidding up stocks on hopes that next week's report will come in big. Second, on the back of Fed chairman Greenspan's testimony, the rate outlook has become much less favorable. Whereas a week ago people were saying that it was likely the Fed would not act at its Aug. 24 meeting, now they are much less sure.

"It's not a bear market or the beginning of a bear market," said Nabi. "I think the total magnitude of the correction will be in the 8% to 10% range -- no more than that. If the market goes down 10%, that would be enough of a correction to open up new purchases." Following that, said Nabi, "I think we'll make a new high by the end of the year."

The speed with which that happens will be highly dependent on what the Fed does. As far as Nabi is concerned, "The worst thing the Fed can do is not hike in August. If they don't get it out of the way, the questions will linger" and stocks could remain under pressure until the Federal Open Market Committee meets again in October.

The sense the Fed watchers got from Greenspan's testimony is that whether the FOMC does hike in August will be highly dependent on the economic data that come out between now and then.

"Greenspan made it pretty clear he wants to tighten," said David Ging, Treasury market strategist at

Donaldson Lufkin & Jenrette

. "He's just looking for an excuse. The market is going to be watching the data intently as it comes out for any sign that inflation is increasing or that the job market remains tight."

The economic focus in the coming week will be the second-quarter

Employment Cost Index

and, to a lesser degree,

gross domestic product

. Both reports "should be okay for the market" said Bill Dudley, director of U.S. economic research at

Goldman Sachs

, but it is unlikely that the bonds will be able to make significant gains, since investors will be so worried about the next week's data.

"The market is going to have a little bit of trouble, because people are going to be very fearful of the data," said Dudley. "If the market rallies, it's not going to be a big rally."