Tuesday will be a busy markets day, and perhaps a telling one

by Michael Tarsala

Tuesday will be a busy day, and potentially an important day to help gauge the next move out of the S&P 500’s trading range.

We are starting one of the busiest weeks of earnings season, with 80 companies in the S&P 500 set to report.

Here are a few important things to watch in the upcoming reports:

  • What companeis are saying about a growth slowdown in China, where quarterly economic growth is now its slowest in three years.
  • Expectations for currency exchange in the coming quarter, especially how a falling euro may hurt U.S. multinationals.
  • Anything companies might be saying in their guidance regarding the “fiscal cliff” — a combination of possible tax increases and U.S. government spending cuts.

Stocks gained ground late last week, breaking a 5-session losing streak after JP Morgan (JPM) indicated that the worst of its credit losses are over and Wells Fargo (WFC) posted an earnings beat.

Source: Stockcharts.com

To keep gaining ground, the S&P must first break above its volume support channel, marked by the horizontal lines that show where the bulk of the trading volume has taken place this year.

That could prove to be a high hurdle, but the next resistance will be the upward-sloping trendline, marked by market highs the past three months.

The key day on the calendar is Tuesday, with earnings expected from Goldman Sachs (GS) and Bank of America (BAC) in the morning, and Intel (INTC) after the closing bell. It’s also when Fed Chairman Ben Bernanke gives his semi-annual testimony to the Senate Banking Committee, starting at 10 a.m. ET.

Positive reaction to the headlines could help the S&P break out and continue to gain ground. Negative or ho-hum news could continue to keep markets range-bound.