NEW YORK ( TheStreet) -- Next week, investors will determine whether the bull market is ready to take a breather.

Stocks have climbed about 45% since lows in early March, marching upward for eight straight trading sessions through Thursday on light volume.

Momentum in a handful of financial stocks helped spur the rally during some sessions, with heavy volume in names like American International Group ( AIG), Fannie Mae ( FNM), Freddie Mac ( FRE), CIT ( CIT), Citigroup ( C) and E*Trade ( ETRC).

But on Friday, the rally lost some momentum, with the Dow Jones Industrial Average closing down 36.43 points to 9544.20, or 0.38%, while the S&P 500 closed at 1028.93, down 2.05 points, or 0.20%. The Nasdaq Composite managed a 1.04 point gain to close at 2028.77, up 0.05%.

"Now the market is contending with a new and somewhat odd undercurrent that has investors questioning if the current earnings and economic environment justify the current trading levels," says Robert Pavlik, chief market strategist at Banyan Partners. "This concern has less to do with actual valuations but instead has more to do with the fact that the market simply hasn't seen any real selling effort in the past seven weeks."

Pavlik says the market was relieved by "a sense that the worst is past us" after better-than-expected corporate earnings and signs that economic conditions have improved or stopped getting worse. Banks that received government handouts like Bank of America ( BAC) and JPMorgan Chase ( JPM) posted big first- and second-quarter profits, and tech firms like Intel ( INTC) and Dell ( DELL) issued bright outlooks for upcoming quarters. Even an executive at General Motors said Friday that the automaker expects to sell 2 million more cars next year.

There is hope on the horizon.

Still, it's worth noting that programs developed by the Federal Reserve, Treasury Department and Federal Deposit Insurance Corp. have supported most of those improvements. The Emergency Economic Stimulus Act by Congress passed by Congress has injected further life into the economy, including the Cash For Clunkers program that helped stimulate vehicle demand.

Corporations' bottom lines also have been lifted by cost cutting and layoffs, which hold back the struggling economy's growth. The Labor Department will release the jobs report on Friday, perhaps the most closely watched economic indicator at the moment. The market expects employers to have cut another 225,000 payrolls in August, sending the unemployment rate slightly higher to 9.5% from 9.4% in July.

"The big thing's obviously going to be the employment report on Friday," says Tim Freeman, head of U.S. equity derivative sales at Capstone Sales Advisors, adding that investors are scrutinizing data beyond the headline figure, like average hourly earnings and average weekly hours. "With every piece of information that comes out, we really need to discern what's going on with the consumer. Is the consumer getting into a better place, or is it more of the same?"

Other data to be released next week include indicators on manufacturing activity, with the purchasing managers index on Monday and the ISM report the following day. Tuesday will also hold the monthly report on auto sales, followed by minutes from the Fed meeting on Wednesday, the weekly initial claims report on Thursday and the broader employment report on Friday.

Freeman says that pricing for S&P options indicates a 2.25% move higher next week, indicating that the market will be "very range bound" in the short term. With Labor Day not yet past, there's likely to be a continuation of light volume next week as well, until more of Wall Street returns from the holiday.

Ralph Nacey, managing principal for WestSpring Advisors, is hoping to see more meaningful trends emerge from economic data, which have been sporadic and conflicting for several months.

New- and existing-home sales have risen, but so have delinquencies and foreclosures. Banks report better results, but the FDIC's list of those in trouble or failing continues to grow. Companies are predicting better sales ahead, but consumer confidence dropped once again in August and retailers have been hit hard by their penny pinching.

Because it's difficult to interpret a meaningful change in fundamentals just yet, Nacey says the market's based on technical analyses of pricing and volume -- a self-feeding loop of activity with unknown breaking points.

"A lot of it is based on specific trading strategies out there, being technically driven, momentum driven," says Nacey. "So if there's not enough bad news out there to take down the market, the technical trading takes over."

Pavlik's research indicates that the S&P may drop as low as 950 in the near term and rise as high as 1,099. He suggests long-term investors use upswings to sell defensive stocks like health care, consumer staples and telecom names, and use dips to buy early cyclical stocks like financials, consumer discretionary, technology, materials and industrials.

-- Written by Lauren Tara LaCapra in New York.

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