WALL STREET WEEK Will weak stock demand trip market momentum?

It's getting harder and harder to impress investors, said one analyst.
NEW YORK (AP) -- Wall Street's 5-month-old rally might soon be tested, but not because investors are worried about the future.
Analysts warn that despite the market's upward momentum, there are too few buyers to sustain the advance if economic fundamentals show signs of weakening.
"The problem you have with the market right now is it has been rising largely because supply has been contracting. There are no sellers around. There has been mediocre demand [from buyers]," said Richard A. Dickson, senior market strategist at Lowry's Investment Research in Palm Beach, Fla.
Throughout the summer, investors have had much to be excited about, including better-than-expected second-quarter earnings and hardier forecasts for future quarters, including Intel's upbeat revenue outlook issued Friday.
But despite signs that the economy and corporate profits are rebounding, demand for stocks has been moving steadily lower since mid-June, while selling has remained flat, Dickson said.
His firm maintains indexes that track buying power and selling pressure going back to the 1930s.
The falloff in buying is reflected in smaller daily gains by the Dow Jones industrials.
Nagging question
Dickson attributed the waning demand to a nagging question that is on everyone's mind on Wall Street: How much of the economic recovery has already been priced into the market?
It's simply getting harder and harder to impress investors, and that's not a good thing for a market that is trying to sustain a huge advance, said Keith Keenan, vice president of institutional trading at Wall Street Access.
"The market has already discounted a smooth recovery, and it won't be as smooth as the bulls anticipated," he said.
Priced at a premium, stocks are susceptible to a wave of selling if and when investors hear any disappointing economic news or profit warnings, market observers say.
Wall Street is also anxiously awaiting September, when traders and investors return from summer vacations and trading volume picks up.
"There are people out there who are concerned about September looming," said Stacie Weiss, head of equity trading at US Bancorp Asset Management
Because there has no real market correction since March 11, when the major indexes began rallying off their lows for the year, a severe downturn could be in the offing, Dickson said.
"Anything that could bring about a resurgence in selling with this mediocre demand could send prices down in a hurry," he said.
Indexes
Dickson said he would feel better about the market's near-term prospects if the major stock indexes had pulled back a bit rather than continuing to barrel higher.
This past week, the Nasdaq composite index reached levels not seen in 16 months, while the Dow achieved its highest mark in 14 months.
The Dow now stands 24.3 percent above its March 11 low, while the Standard & amp; Poor's 500 is up 24 percent from that point. The Nasdaq is up an even more stunning 38.8 percent.
"We are getting more and more nervous the longer we go without a correction," Dickson said. "The longer we go without a correction, the more vulnerable we are to a serious correction."