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After spending the early part of the week on the red, Wall Street ended last week in the black. All major assets rallied, especially precious metals that have been in the doghouse for several months. The Nasdaq traded at the highest level since the dot.com crash. This time around, the rally began following some reassuring words from Fed Chairman Ben Bernanke on Wednesday on the continuation of QE.

What is next? Will the rally continue?

Major Equity Indexes Last Week

Index

One-week Performance (%)

SPDR S&P 500 Trust (NYSEARCA:SPY)

2.96

Powershares QQQ Trust (NASDAQ:QQQ)*

3.47

SPDR Dow Jones Industrial Average (NYSEARCA:DIA)

2.17

*Nasdaq traded at the highest level since March of 2001.

Major Precious Metals ETFs Last Week

ETF

One-week Performance (%)

SPDR Gold Shares (NYSEARCA:GLD)

4.2

iShares Silver Trust (NYSEARCA:SLV)

4.3

Freeport-McMoRan Copper and Gold (NYSE:FCX)

2.5

It all depends how well Wall Street performs in four tests:

The first test will come on Monday morning (Asian time), when China will report Q2 GDP. Estimates range anywhere from 6.8% to 7.5%. Any surprise here will unsettle Wall Street, especially precious metals and other commodities that are sensitive to fluctuations in demand from the world's second largest economy. In addition, Wall Street will be looking for clues to see how China plans to deal with the looming banking crisis of the country.

The second test will come throughout the week, as the US government reports data on retail sales, CPI, industrial production, and housing starts. Any major surprise in any of these indicators, especially in the CPI, could unravel Wall Street. A weak retail sales number, for instance, could hamper the rally in consumer goods, especially the upscale retailers like Tiffany (NYSE:TIF) and Costco (NASDAQ:COST), while a strong CPI number most could add to US Treasury market woes.

Economic Calendar July 15-19

Indicator

Consensus Estimate

Last Period

June Retail Sales

+0.7%

+0.6%

June CPI

+0.3

+0.1

June Industrial Production

+0.3%

0.0%

June Leading Indicators

+0.3%

+0.1%

June Housing Starts

950,000

914,000

Third Fed Chairman Ben Bernanke gives the semi-annual testimony on monetary policy. Investors will be looking for two key words, "accommodative" that would be bullish, and "tapering" that would be bearish, especially for US Treasuries and commodities. In either case, Bernanke's words will come with a disclaimer; it all depends how quickly the labor market moves towards the magic number of 6.6 percent-the estimated unemployment rate.

Fourth, there will be a wave of earnings reports, from financial and technology companies like Citigroup (NYSE:C), Bank of America (NYSE:BAC), Yahoo (NASDAQ:YHOO), and Intel (NASDAQ:INTC).

Analysts have been very bullish on financials, following a steepening of the yield curve and diminished reserves for bad loans that have helped the bottom lines of JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) that reported results last Friday. In a cover story, this weekend's Barron's is extremely bullish on Citigroup, citing the company's global franchise, and management changes following a change in leadership last April.

Analysts have been pessimistic on high technology stocks. Evercore's downgrade of Intel, and Citigroup's removal of Qualcomm (NASDAQ:QCOM) from the company's focus list are two cases in point. Evercore cited weakening PC sales, while Citigroup cited saturation in the smartphone market.

But markets may have already discounted these prospects. PC market leader Hewlett-Packard (NYSE:HPQ) has been rallying in the face of declining PC sales. Besides, when it comes to technology leaders, the question for long-term investors isn't how traditional metrics like sales growth and profit margins have fared in recent quarters, but whether these leaders continue to enjoy sustainable competitive advantage, the subject of the remainder of the article.

The bottom line: Keep an eye on the big picture in China and the US, the small picture, and the policy makers, especially the Chairman Ben Bernanke. It will be another interesting week.

Source: Will The Rally Continue On Wall Street This Week?