Paul Larson, equities strategist at Morningstar, says macroeconomic factors have been driving the exceptional volatility we’ve seen in the market. "When you look at things from a company-by-company basis, things have been fairly tame and earnings have been very good. It’s not company performance that has been driving volatility," he says. In the short-term, Larson expects volatility to remain elevated but doesn’t expect large directional moves. He expects the indexes to close the year a couple of percentage points higher.
Spencer Patton, chief investment officer at Steel Vine Investments, says it is going to be very difficult to get above 1,350 in the S&P unless some exceptional news comes out from companies during earnings season. "A lot is going to depend on commodity prices. For a while it looked like we were going to have a bit of a break in some commodities, but now a lot have leveled off. We’re going to have a mixed picture during corporate earnings season," he says. He pegs support in the S&P 500 at 1,250, but expects it to reach 1,325-1,350 by year-end.
A lot of the market direction going forward will depend on measures of the economic recovery. "The consensus seems to be that there’s still a lot of concern about the economy as a whole, and that’s one of the key reasons why we refuse to move on interest rates," says Darin Newsom, senior analyst at Telvent DTN. Although he expects further slowing in the recovery, Newsom says investors still need to treat the stock market with caution. He expects the Dow to test resistance near 12,540 and begin to slide lower with long-term support at 10,762. He sees the same direction in the S&P and Nasdaq 100 with long-term support at 1,140 and 2,352 respectively.
Jeffrey Friedman, senior market strategist at Lind-Waldock, is bearish the markets in the short-term, but expects the year to end with a rally. "We’re sideways to lower right now. Come September, we’ll see some economic news that starts to beat estimates and we’ll start to rally," he says. "In the short-term, I’m a seller; in the longer-term, I’m optimistic." He says continuing worries about Greece and other periphery Eurozone nations as well as a slowdown in China will continue to put pressure on the markets before they break out. In the short-term, he expects the S&P to be range-bound at 1,260-1,325 and break out to end the year with a Santa Claus rally. In the Dow, he sees a range of 11,800-12,500, and if GDP nears 3% for the year, then it should be above 12,700 by December. The Nasdaq 100 will have a short-term range of 2,200-2,340 and hit 2,450 by Thanksgiving.