Traders will look for further confirmation Tuesday that the stock market has found its footing, ahead of the first major bank earnings.
"We continue to see the healing of our correction," said Jeff Carbone, co-founder and managing partner of Cornerstone Financial Partners, which has $1.05 billion in assets under management. "Now it's going to be watching the financials and earnings, and if we can see some good beats on the earnings, which we know have been revised down …, we can see this market continue to run up strong."
On Monday, the Nasdaq composite closed up 8 points to 4,838.6, above its 50-day moving average and joining the Dow Jones industrial average and S&P 500 above that technically key level. All three major averages are within 8 percent of their 52-week highs.
"I think it's quite possible you're going to be able to hold those levels over the next couple weeks," said Cam Albright, head of investment strategy at Wilmington Trust Investment Advisors, which has $76 billion in assets under advisement. "You still have potential for short covering (and) earnings season, which may spark more interest in the marketplace."
JPMorgan Chase kicks off a heavy week of financial sector earnings with its quarterly report after the closing bell Tuesday. Bank of American and Wells Fargo are due to post results Wednesday, while Citigroup and Goldman Sachs are among the other financial institutions reporting Thursday.
"We think financials will probably do fairly well. We think it's a sector that's benefiting from (reasonable economic growth). Loan losses still relatively contained," Albright said, noting he's most concerned about revenue growth across all earnings reports.
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To be sure, he said his outlook on stocks has turned neutral as he's reduced U.S. equity holdings to moderately overweight.
Earnings estimates for the financial sector are down to growth of 3.0 percent versus expectations of 6.1 percent growth two weeks ago, according to S&P Capital IQ.
Intel is also scheduled to report after the close Tuesday, while Johnson & Johnson is due to release results before the opening bell.
"I think the market's going to be keying off anything that's dramatically off expectations. A lot of it's going to be in the tone of management," said Jeff Morris, head of U.S. equities at Standard Life Investments, which has $393.1 billion in assets under management.
Standard Life Investments has holdings in JPMorgan, Citigroup and Wells Fargo, according to SEC filings as of the end of July.
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JPMorgan earnings are "usually fairly strong relative to other banks," he said. "The market's really looking for direction. The better part of August and September has been subject to violent swings (on the Fed's rate hike decision)."
Stocks closed mildly higher Monday in one of the lowest trade volume days of 2015 due to Columbus Day. Bond markets will reopen Tuesday after the Monday holiday.
The S&P 500 closed up 2.57 points at 2,017.46, with utilities leading all sectors except energy and materials higher. The Dow posted its seventh-straight day of gains, up 47 points at 17,131.
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Oil will remain in focus Tuesday, after giving up more than half of last week's near-9 percent gain to settle down 5.1 percent at $47.10 a barrel.
The CBOE Volatility Index (.VIX), widely considered the best gauge of fear in the market, continued to edge lower from recent highs of above 25 to hold near 16.
Daniel Deming, managing director at KKM Financial, said the lower VIX indicates there's "no threat that is going to break down to levels the market hasn't seen in some time."
"I think the perception is, for the time being, the market's going to be able to maintain these levels," he said.
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St. Louis Fed President James Bullard, an alternate member of the Federal Open Market Committee, is scheduled to speak at 8 a.m., ET.
Correction: An earlier version of this story misstated when the Treasury's monthly budget statement was due. It is scheduled for release Thursday.