S&P faces 1,100, searches for catalyst

By Leah Schnurr

NEW YORK (Reuters) - U.S. stocks could face difficulty gaining traction this week as the S&P 500 bumps against the 1,100 mark and investors become content to cool their heels rather than risk losing gains made for the year.

With the vast majority of corporate results already reported, market watchers are casting around for the next catalyst to drive stocks. That will put next week's round of economic data in the spotlight, including retail sales, the Consumer Price Index and housing starts.

The equity market's 60 percent rise from 12-year lows hit in March reflects optimism for improved demand in coming months.

But the path out of the recession is a bumpy one.

Investors are trying to strike a balance between improved corporate outlooks and the consumer's slow recovery due to a weak labor market.

"We've seen a pullback in buying, but there's not really any conviction from the sellers either," said Jeff Kleintop, chief market strategist at LPL Financial in Boston. "I think we're in no man's land here."

After beginning the year at around 900, the S&P 500 faces major resistance at the 1,100 barrier. The broad index has been unable to close above that mark this year, despite four intraday attempts. But a decisive close above the psychologically important level could be seen as a buy signal.

"This area was resistance last month and was trouble again"

this week, said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati, Ohio.

"Nonetheless, we expect this level to eventually give way and usher in another wave of buying."

Volume will also be a test of the strength of any breakout. Of late, volume has been weak on days the market has been up, which is "always an indication that conviction is not there and the market is subject to a pullback," said Quincy Krosby, market strategist at Prudential Financial in Shelton, Connecticut.

Low trading volume also makes it easier to push the market around and can increase volatility.

IS THAT ALL THERE IS?

With last year's slaughter in the stock market still clearly in mind, investors appear to have turned more cautious in recent weeks, unwilling to give up any gains they've made back this year.

The S&P 500 is up 21.1 percent for the year so far, a vast improvement over last year's 38.5 percent plummet that was the worst year for stocks since the Great Depression.