This Week's Reports Could Keep the Rally in Check

Don't be surprised if September's remarkable stock market rally cools off this week. As resilient as equities have been recently, they've also shown themselves susceptible to lousy housing headlines and a more downbeat Federal Reserve -- and there could be plenty of both in the days ahead.

Tuesday alone brings new reports on housing starts and permits and the latest policy statement from Federal Reserve Chairman Ben Bernanke. Investors will also be contending with new- and existing-home sales figures, durable goods orders, leading indicators and weekly jobless claims this week.

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"My sense is [housing] is going to be weak, and it's going to cause the market to sell off," says Kenny Polcari, managing director at inter-dealer broker ICAP Corporates. "As we saw last week, housing is tough, and it continues to be tough."

There's also the technical matter that after rallying more than 7% this month, a range-bound market is nearing the top of its range, Polcari says, as buyers disappear when the S&P 500 ($INX) bumps up against 1,130. "I think for the moment that's going to be the high."

For more on Polcari's outlook from the floor of the New York Stock Exchange (NYX), see the video below.