Stocks essentially broke even for the holiday-shortened week. Yet, somehow the market ended last week on a high note, still headed higher.

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That doesn't preclude a pullback from still developing. As was the case a week ago and also in the middle of this past week though, there's room for a pullback without snapping the young rally effort. It's all just a matter of where the bulls want to take a stand if a bit of selling is in the cards. The good news? They can lean on several different moving average lines for help.

We'll look at the matter in some detail in a moment. Let's first, however, run down last week's key economic announcements and preview what's in the cards for this week.

Economic Data Analysis

An important set of economic barometers continues to move in the wrong direction. The Institute of Supply Management's manufacturing index tumbled again in March, reaching a new multi-month low of 46.3. The services version of the index peeled back to, and while it didn't slide to a new low, it peeled back far more than expected... and remains in a bigger-picture downtrend.

ISM Services, Manufacturing Index Charts

Source: Institute of Supply Management, TradeStation

This is no small matter. Eventually, the economy reflects the ISM data, and the market itself responds in kind. These numbers have been retreating since the middle of 2021, with no end in sight. If rekindled economic strength was in the cards, we should have seen some evidence of it by now in the ISM numbers.

And yet, there's enough economic strength to prod the creation of 236,000 new jobs in March. That's not a lot... certainly less than February's 311,000 additions. But, the nation's nearly maxed out job-wide. The unemployment rate stands back at a multi-year low of 3.5%.

Payroll Growth, Unemployment Rate Charts

Source: Bureau of Labor Statistics, TradeStation

It remains to be seen if the jobs market is booming or if employment and wages are simply still not adequate to help people pay their bills. As of February about half of American households earning more than $100,000 per year are living paycheck to paycheck, suggesting the jobs data itself isn't painting a complete picture of what's actually happening.

Everything else is on the grid.

Economic Calendar

Source: Briefing.com

This week is a big one too.

The party starts on Wednesday with consumer inflation, followed by producer inflation data on Thursday. Economists believe consumer inflation will remain relatively brisk, while producers' brief respite from higher prices in February came to a close in March... with a slight renewed increase.

Annualized Inflation Rate Charts

Source: Bureau of Labor Statistics, TradeStation

Either way, although cooling from 2022's painful levels, annualized inflation rates are still uncomfortably high. And, we're now stacking two years' worth of huge price increases. (That is to say, the inflation rates that are sky-high now are being compared to sky-high prices from a year earlier.)

The other biggie this week is Friday's retail sales figures for March. You can see February's were in line with March's, and that with the exception of November's and December's slight lull, spending growth remains fairly healthy. Problem? The forecast for last month's retail consumption is another lull.

Retail Sales Charts

Source: Census Bureau, TradeStation

Pay close attention to the underpinnings of last month's retail figures. If any pullback is the result of deflation or lower gas prices, that's not a bad thing. An uptick in spending on consumer staples and/or weakness in discretionary spending may be a subtle sign that the economy isn't quite as strong as it seems on the surface. (Of course, the opposite could also be true. Just parse the numbers carefully.)

Stock Market Index Analysis

The momentum is bullish, but stocks are clearly running into a major technical headwind.

This is most evident on the daily chart of the Nasdaq Composite. Take a look. The index itself bumped into an established resistance line at 12,226 a week earlier and again early last week, and took a couple of steps back. At the same time, the Nasdaq's volatility index (VXN) isn't able to move below the floor at 23.6... something that would ideally coincide with further upside from the market.

Nasdaq Composite Daily Chart, with VXN

Source: TradeNavigator

The S&P 500 is in a similar situation. The index itself didn't bump into a proven technical ceiling, but the S&P 500's volatility index (VIX) is finding clear support at the 18.15 mark. While the VIX doesn't absolutely have to move lower for stocks to move higher, it's certainly a big help. Traders aren't ready to truly, completely commit to a rally though.

S&P 500 Daily Chart, with VIX and Volume

Source: TradeNavigator

Nevertheless, the market is in rally mode even if it's not a well-grounded, well-founded rally. The S&P 500 is still above all of its key moving average lines, all four of which are now sloped upward. And, as the weekly chart of the index shows us, the market is now making higher highs and higher lows since October's pivot.

S&P 500 Weekly Chart, with VIX and Volume

Source: TradeNavigator

The weekly chart, of course, also shows us the VIX really is struggling to move under a major technical floor.

One final bright spot... the Dow Jones Industrial Average. You'll recall a couple of weeks ago the blue-chip-heavy index was on the wrong side of several key lines in the sand. Now it's above all of them, save one -- the resistance line that connects the peaks from November and February (blue, dashed) currently at 34,104.

Dow Jones Industrial Average Daily Chart

Source: TradeNavigator

Again, the volatility indices don't have to be able to inch lower for the market to move higher. It helps, but it's not a requirement. Volatility indices can simply drift sideways while the market itself moves higher. That's a situation, however, that requires moderated, sustainable confidence. That doesn't appear to be the situation we're experiencing at this time. Stocks seems oddly vulnerable to the wrong kind of headline.

All the same though, the bigger-picture momentum is bullish. There's even room for modest retreats back to all the aforementioned moving average lines without breaking this momentum. If that's what we see next, don't freak out. The indices will need to break below these moving average lines for bearishness to be rekindled.

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