Inflation data for September will have a bearing, too. The reports could start a rally or spur a decline, depending on how much fuel they offer the Federal Reserve when it meets to decide on interest rates later this month.

"The path of least resistance right now, particularly with large-cap stocks, is up," said Mike Holland, fund manager of Holland Balanced Fund. "The valuation of the large-cap stocks that are in the Dow, for example, are still reasonable relative to inflation and interest rates."

Stocks have had a strong run in the past week with the Dow Jones Industrial Average closing at record levels three times and the Nasdaq Composite Index  surpassing its best closing level in five months.

Earnings will continue to be the big driver for equities and "more specifically, guidance and what the companies are saying about the prospects for the fourth quarter and for the first quarter of [next year]," said Stephen Sachs, head of trading at Rydex Investments.

Sachs, like Holland, expects to see another climb in stocks.

The market is entering the busiest two weeks of the earnings season. The lineup for next week includes Intel Corp, IBM, 3M Co, Google Inc, Johnson & Johnson, Coca-Cola Co. and Honeywell International Inc.

"We're at a critical crossroads here. If we're going to keep this rally going, we're going to need to see that guidance from Corporate America very strong," said Sachs.

So far, companies are showing strength in their third-quarter results, said John Butters, senior research analyst at Thomson Financial.

"It's been a fairly positive quarter in terms of pre-announcements," he said.

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