Inspired buying is expected to prop up the local stock market this week, buoyed by rallying Wall Street in New York which has stretched its summer rally to four weeks amid increasing optimism about an end to recession, reinforced by data suggesting the economy has bottomed and is now strengthening.

The market has hit its best levels of the year, and analysts are hotly debating whether the runup can continue.

Wire agency AFP reported that in the week to Friday, the Dow Jones Industrial Average of blue chips climbed 2.16 percent to 9,370.07, capping a four-week surge of 15 percent and reaching its best levels since last November.

The Standard & Poor's 500 index broke through the psychological barrier of 1,000 points, gaining 2.33 percent for the week to 1,010.48, marking a stunning gain of some 50 percent from lows hit in March for the broad-market index.

The tech-dominated Nasdaq addded 1.1 percent to 2000.25, bringing its year-to-date advance to a hefty 26.8 percent.

But local market players will likely pick on select blue chips following last week’s wave of profits-taking and selling pressure.

AB Capital Securities has advised investors to watch out for the latest US employment data, as it expects corporate earnings results to have a significant influence on how the market will perform this week.

On the technical side, AB Capital pointed to some indicators of a further weakness in the near term as the negative divergence between the main index and some of its oscillators like the CCI and stochastics. Immediate support levels for the PSEi are at 2,700 and 2,570. Resistance is at 2,900.

BPI Securities noted that the market's continued correction following the lead of US stocks last week. Volumes, however, were lower, breaking P3 billion on the downside.

Market's two days of decline had brought the index close to initial support – 2722 to 2769. The next support is 2645.

AB Capital noted that after four straight weeks of gains, the local equities market finally had its first taste of decline.
 
“Profit-taking was heaviest on the last two trading days last week. Trading was suspended last Wednesday as the country mourned the passing of former President Corazon Cojuangco Aquino.”