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Stocks may have ended the week on a high note with Friday's 0.88% gain, but it was nowhere near enough to undo the losses suffered earlier in the week. When it was all said and done, the S&P 500 (SPX) (SPY) fell 33.60 points (-2.1%) last week, closing out at 1555.25. Oh, that was also the worst week for stocks since November.

The perma-bulls are already coming out of the woodwork saying the worst is over and that it's safe to get back into stocks. We're not so sure. Though it is true the S&P 500 started to find support right where it should have found support, the battle's hardly over yet.

We'll show you all the things that could still go wrong with the market below, right after we explore last week's and this week's economic data.

Economic Calendar

It seems odd to say it, but not only is rampant inflation not a problem, we're actually on the cusp of something just as bad.... deflation. Overall, consumer prices fell 0.2% last month, and only increased 0.1% on a core (ex food and energy) basis. The annualized inflation rate is 1.47%, which is still not 'red alert' levels. But, that's the low end of the healthy range, and the number has been sinking - precipitously - since October.

On the construction front, housing starts reached a pace of 1.039 million homes. That's a multi-year high. Issued building permits hit a pace of 902K. That's not a multi-year high, but near a multi-year high, and both data sets remain in strong long-term uptrends.

New unemployment claims drifted a little higher last week, from 348K to 352K. Ongoing claims fell from 3.103 million to 3.068 million. Though the downward move we've seen from each is shallowing/slowing, the overall trend is still pointed lower. More important, the surge in new claims we saw three weeks ago (the one that spooked everyone) is now barely even a memory.

All the rest is on the grid below.

Economic Calendar
(click to enlarge)

The coming week will be another light one in terms of the amount of stuff we're hearing, but we will be hearing a couple of important ones on the real estate front again. For instance, on Monday we're hear from the National Association of Realtors about last month's existing home sales rate; the pros are looking for a slight increase, from February's pace of 4.98 million to 5.01 million for March. The Census Bureau will follow that up on Tuesday with March's new home sales pace. Economists expect a figure of 415K, slightly up from February's pace of 411K. Both data sets show continued, even if tepid, improvements.

Durable orders will be announced on Wednesday, and they won't be good. The market's looking for a 3.1% dip in March's numbers when factoring in planes, trains, and automobiles. Even taking usually-volatile transportation out of the equation, however, we're only apt to see a flat reading.

On Friday we'll hear the first estimate for Q1's GDP. Economists are looking for a growth rate of 2.8%, which will likely move the market (as long as the market is receptive to a good news-based surge at the time). Anything will look better than the prior quarter's meager 0.4% increase.

Stock Market

Yes, Friday may have been 100% bullish (DIA) (QQQ) (IWM). Don't get too excited just yet though - the market was selling off hard through Thursday, and hit the lower 20-day Bollinger band (blue in the charts below) head-on. We SHOULD have bounced there, and we did. That's not a sign that everything is bullish again. It could and should take a few days and some back-and-forth action to break under a key floor like the lower Bollinger band [or the 50-day moving average line (purple)]. In fact, the market could actually move a little higher this week and still not necessarily rekindle the bigger-picture uptrend.

The key line in the sand we're watching now is the 20-day moving average line, currently at 1564. If the S&P 500 can close above that line, the bulls have a proverbial leg to stand on. Anything under that mark, and the market remains more vulnerable than not to a full-blown correction. Take a look.

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

All that being said, the CBOE Volatility Index (VIX) (VXX) is telling us just as much about what's in store here as the indices do.

Though the VIX closed above both of its key upper Bollinger band lines on Thursday, it pulled back - sharply - on Friday, to well within the Bollinger band envelope. And, it's still got room to keep falling before finding a floor.... the first one at key moving average lines at 13.7, and the lower Bollinger bands at 10.8; the moving average lines are the more likely floor.

So what? Well, there's no "so what" yet, but we are going to be watching where the VIX hits a floor or ceiling as a clue for where the S&P 500 will start to make its turns.

A weekly chart adds some perspective, but doesn't add certainty.

Just for the record, the S&P 500's long-term trend line (dashed) that extends back to mid-November has NOT been broken. Until it's snapped, the bulls are still technically in charge.

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

You can also see just how low the VIX is right now, relative to its long-term norm. The problem is, when we zoom out to the weekly chart, we don't see any convincing evidence that the VIX is trying to move higher. Until the volatility index actually pushes up past its ceiling at 19.30 (red, dashed), the market's not going to take a major hit. A minor one, maybe, but not a major pullback.

Our expectation from here is a bearish one, but that's a very tentative call. While the long-term (weekly) chart has yet to break under a key support line, it is very overbought thanks to the big runup since November. Thing is, until the support all around 1540 is broken, that brewing bearishness doesn't really have a foothold.

Oh, and another reason we're leaning bearishly... all it took was a brush of the S&P 500's multi-year resistance line (dashed) to roll over to the downside. This monthly chart of the SPX should scare all of us, though not surprise any of us.

S&P 500 - Monthly
(
click to enlarge)

Source: Market Outlook - 15 Years Of History Overhead

Additional disclosure: BigTrends Rapid Options Income subscribers will likely open a new SPY options position on Monday.