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Though the market got off to a rough start last week, the strong finish led stocks to the second winning week in a row…barely. The S&P 500 Index (SPX) (NYSEARCA:SPY) closed last Friday up 0.5% higher than where it closed the prior week. On the other hand (and you'll be able to visually see this on the chart below), the bullish effort was already fading as we approached the end of the week.

So which is it? Will buyers step up the effort to kick off the new week, renewing the market uptrend (NYSEARCA:DIA) (NASDAQ:QQQ) (NYSEARCA:IWM) that started on Wednesday or, do we need to take the fade in the latter part of last week as a warning? We'll dissect the dilemma below, right after we take a look at the major economic numbers from last week and this week.

Economic Calendar

A fairly busy week last week; we'll just hit the highlights. In order of appearance:

* Consumer confidence continues to climb. For November, the Conference Board's consumer confidence level reached 73.7 - the highest reading in over four years.

* New home sales rolled in at a rate of 368K for October. That wasn't the 388K the market was expecting, and was off a little from the peak around the middle of the year. Then again, there's bound to be some seasonal slowing (even with the adjustment) as we approach this time of year.

* As it turns out, the domestic economy's GDP for the third quarter wasn't quite as strong as first assumed. The pros say it grew at 2.7%, versus the prior estimate of 2.8%. It's not the final number. The final number will be posted in a couple of weeks.

* Pending home sales were up 5.2%. The index that measures the total - published by the National Association of Realtors - reached its highest levels in years, and with the exception of a few peaks stemming from the home-buyer's tax credit, that's the highest number in six years.

* Incomes didn't grow at all in October, and spending actually fell 0.2%. It doesn't exactly jive with the firm increase in consumer confidence.

Economic Calendar

The coming week will be a pretty busy one too, particularly on the employment front. Here are the biggies to watch for:

* Monday: Auto sales for October will be unveiled.

* Wednesday: The employment picture starts to get rounded out, beginning with the ADP employment change figure. Forecasters say payrolls will increase by 125K for November, slightly off from the 158K new jobs that ADP says were created in October.

* Thursday: New and ongoing unemployment claims are going to be announced. It's been months since we've actually seen any real progress on either front, and we're not likely to see any change this week either.

* Friday: Batten down the hatches, because we're going to get a huge update on the employment picture. Payrolls should show positive growth, but nowhere near as solid as the prior month's growth. In fact, the unemployment rate is expected to move up from 7.9% to 8.0% again.

Stock Market

With just a quick glance, it looks like the S&P 500 is going strong, supported by and pushing off of key moving average lines. When you take a longer look though, red flags start to wave.

The bullish case: The bullish effort from last week actually took hold two weeks ago, starting with the push off the lower 20-day Bollinger band (blue). In the meantime, the S&P 500 managed to finally move above the 100-day moving average line (gray) after a four-day struggle (though it took a retracement to the 200-day moving average line on Wednesday to spark the final bullish "umph" the index needed).

The bearish case: While the S&P 500 may have knocked over some walls, it's still not cleared the key 50-day moving average line (purple). That in itself wouldn't be a huge problem, were it not for one thing - the pace of the rally is slowing, and the volume behind the rally (never all the strong to begin with) is quite weak. In other words, this bullish effort is quite hollow.

S&P 500 & VIX - Daily Chart
(click to enlarge)

So what? This is one of those cases where the market is trapped between a rock and a hard place. The good news is, we know where the floor and ceiling is - 1420 and 1385, respectively. The bad news is, there's no telling when the market may actually shove its way outside of those boundaries. It could happen today, or it may take until next week.

The CBOE Volatility Index (VIX) (NYSEARCA:VXX) isn't helping spot the undertow at this time.

Any additional perspective from the weekly chart? Actually, a little. On the weekly chart it looks like there's plenty of room to keep rallying before a ceiling is hit (at 1480), and it also looks like there's a fair amount of momentum behind the rally.

More than that, we can also get a better handle on the VIX with the weekly chart. Though it's not moving, we can tell there's still a key floor for the VIX at 13.50 (red, dashed), which is close to where the VIX's lower Bollinger band will be by the time it can be tested. Simultaneously, the VIX is being capped by its one-year moving average line. None of that means anything, yet, but the VIX should end up offering some leading or confirming clues when the time comes.

S&P 500 & VIX - Weekly Chart
(click to enlarge)

Sector Valuations

Though it's more of an investor's tool than an option trader's tool, valuations at the sector level still matter to everyone. So, since it's rarely seen anywhere else, this week we'll break things down by sector, with the bulk of third quarter's earnings having been factored in. The disparity can be pretty amazing.

How does one use the data? There are about a million ways to use it, but one way is a simple rule of thumb - the earnings growth rate should equal the P/E ratio (thus justifying a higher P/E ratio for higher-growth areas, and explaining a lower P/E for low-growth sectors). As they say though, there's always more to the story, everything is relative.

Sector Earnings and Valuation
(click to enlarge)

Source: Market Outlook - Between A Rock And A Hard Place

Additional disclosure: Rapid Options Income (ROI) subscribers are in a SPY options position.