Incredibly enough, last week's gain was the biggest weekly gain of the year. The S&P 500 (SPX) (SPY) gained 3.22% last week, and though it was mostly just fortunate timing that allowed for the big week-to-week move, the momentum is impressive nonetheless.

The question is, can it last? Answer: Maybe. The rally knocked over some fairly important resistance levels, though a few more remain. Also, the advent of Q3's earnings season could either work for the market or against it.

Either way, the rest of October should be plenty exciting.

We'll take a look at where stocks are and where they're likely going right after a look at last week's economic news and a preview of this week's economic reports.

Economic Data

Last week was relatively slow in terms of economic news. In fact, the only item of real interest was the release of the minutes from last month's FOMC meeting, and even that didn't tell us anything we didn't already essentially know. That is, the Fed is concerned about the slow-down in the global economy crimping the already-fragile state of the United States' economic growth.

Economic Calendar Source:

This week is going to be considerably busier, even though the party doesn't start until Wednesday with last month's producer price inflation data, which serves as something of a preview to Thursday's consumer inflation data.

As of August, inflation remained relatively tame for everyone. The consumer inflation pace was a palatable 1.8% without counting food and energy, and was nil when factoring in food and oil/gas prices. Overall producer inflation was also non-existent with food and energy out of the picture, but still only up at an annual pace of 0.9% including everything.

Inflation Rate Chart Source: Thomas Reuters

Also on Wednesday we'll hear last month's retail spending report. These figures have been ok of late, but never sizzling. Economists are looking for weakness on this front for last month too, with expectations for overall growth of only 0.2%, and a decline in retail sales of -0.1% when taking automobiles out of the picture.

You'll also want to keep an eye on Friday's capacity utilization data and industrial productivity data from the Federal Reserve. Analysts are calling for another month of weakness. We're starting to see a few too many stumbles from this data.

Capacity Utilization & Industrial Production Chart Source: Thomas Reuters

Stock Market Index Analysis

The stage is certainly set for a breakout. The question is, will the actors say their lines? In more specific terms, the market has some momentum under its belt, and even hurdled a few key moving average lines late last week. There are still a couple more hurdles to clear, however, before we can say the market has passed all its near-term stumbling blocks.

This is plainly evidence on the daily chart of the S&P 500. Here we can see the index has cleared the 50-day moving average line (purple) after a telling double-bottom at 1866. But, it's interesting how the S&P 500 stalled right at 2023, where it peaked in mid-September. Maybe the index is nothing more than range-bound at this point.

S&P 500 & VIX Daily Chart Chart created with TradeStation

Either way, the big line in the sand is still the 200-day moving average line (green) at 2061.

The good news for the bulls is, the MACD lines are bullish. The bad news for the bulls is, the Percent R line has not yet confirmed bullishness.

It's a nuanced signal, but one we've used with great success in many of our trading services - a Percent R confirmation. In simplest terms, it's a Percent R line that crosses above the 80 overbought threshold, pulls back a bit with the market, but turns higher again never breaking back under the 80 line. It's likely the S&P 500 would break above the 200-day moving average line at or around the time we get the confirmed bullish signal from the Percent R indicator.

A look at the CBOE Volatility Index (VIX) (VXX) and the Equity Put/Call Ratio - both sentiment tools - also suggests there's some room for the market to keep running higher before reaching an extreme reading in bullish sentiment.

Put/Cal Index Sentiment Chart Chart created with TradeStation

Zooming out to a weekly chart of the S&P 500, we can get a better feel for the double bottom and the strength of the rally over the past week and a half. In this timeframe there appears to be even more room to keep running higher.

S&P 500 & VIX Weekly Chart Chart created with TradeStation

The daily chart of the NASDAQ Composite (COMP) looks similar, though not exactly the same. Specifically, the NASDAQ has a major swath of technical resistance at 4950. The composite may reach that level with relative ease, but getting beyond that level is the more meaningful test.

NASDAQ Composite & VXN Daily Chart Chart created with TradeStation

Bottom line: The bulls still have a few things to prove if they're going convince everyone on the sidelines it's time to get back in.

Crude Oil On the Verge

Though still not at prices that are decidedly profitable for the oil drilling industry, the price of Crude Oil (USO) has quietly wiggled its way back to a huge make-or-break line in the sand.

As the chart below shows, crude futures got their second wind last week after pausing in September. It was enough to push the commodity above the August peak of $49.40, which means oil has logged its first higher high and higher low in months.

As the chart below also shows, though, the rally effort stalled on Friday right as the 100-day and 200-day moving average lines were bumped.

Crude Oil Futures Chart Chart created with TradeStation

A stall here doesn't necessarily mean the rally has been stopped; there should be a bit of indecision and a bit of a battle at one or both of these key moving average lines. What's unclear so far is which side of the table is going to end up winning the battle. But, a break above the ceilings around $51 may have the effect of unleashing a lot of pent-up buying, and as such this chart should be watched closely this week.

Also bear in mind oil prices may need to peel back a bit and get a running start again to punch through that resistance zone. Trade Well, Price Headley