The sellers were finally easing up late Friday. But, by then it was too late. The S&P 500 finished last week in the red to the tune of 1.8%, and following through on the prior week's bearish reversal. The move dragged most of the indices under multiple technical support levels.

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There's still a fighting chance the market could recover here. That chance comes in the form of other key support levels that have not yet been broken, but are about to be tested. The market may have one more chance at staging a rebound before it's too far gone to salvage. But, the odds of such an outcome are fading.

We'll show you why in a moment. Let's first run through last week's biggest economic announcements and then preview what's coming this week.

Economic Data Analysis

Last week's biggie was of course November's consumer inflation report, rounding out the previous week's look at producer inflation. As expected, inflation is cooling... and doing so a little faster than anticipated. Economists were looking for the overall inflation rate to slip from 7.7% to 7.3%, but it fell to 7.1%. On a core (ex food and fuel) basis, inflation slumped from 6.3% to 6.0%.

Consumer, Producer Inflation Charts

Source: Institute of Supply Management, TradeStation

Not that the Federal Reserve had this information at the time it made the decision, but based on the inflation numbers to-date and the expectations for last month's figures, the FOMC did bump up interest rates once again. This rate hike pushed the Fed's target base rate up 50 basis points to 4.25%, with a few more increases likely on the way. While price increases are slowing, the current pace of them is still quite brisk, and problematic for the broad economy.

There was other economic data dropped last week, however, worth mentioning.

Take retail sales as an example. Forecasters knew there'd be a measurable slowdown following October's surge, but higher prices and malaise are taking a pretty big toll. Overall retail spending (not counting cars) actually fell 0.2% from October's figure, rather than rising 0.1%.

Retail Sales Charts

Source: Census Bureau, TradeStation

We also heard last month's capacity utilization and industrial productivity figures. They could have been better. Utilization cooled a tad more than expected. Production, meanwhile, ebbed rather than growing. And in both cases it certainly seems like the numbers are peaking, if they haven't peaked already.

Industrial Production, Capacity Utilization Charts

Source: Federal Reserve, TradeStation

Everything else is on the grid.

Economic Calendar

Source: Briefing.com

This week's going to be another big one, particularly in terms of real estate numbers.

On Tuesday we'll hear last month's housing starts and building permits. Clearly we could use some help on this front, although it's likely we'll continue to see the broad downtrend.

Housing Starts and Building Permits Charts

Source: Federal Reserve, TradeStation

Look for last month's existing home sales data on Wednesday, although November's new home sales won't be reported until Friday. Again, the current trend is pointed lower, and will likely remain pointed in that direction even if we get a bit of relief for last month.

New, Existing Home Sales Charts

Source: National Association of Realtors, Census Bureau, TradeStation

Also on Wednesday we'll hear December's consumer confidence score from the Conference Board, although the third reading of the University of Michigan's sentiment index also won't be posted until Friday. Both have been retreating of late, and like so many other economic indicators, don't be surprised if they continue to do so this week.

Consumer Sentiment Charts

Source: Conference Board, University of Michigan, TradeStation

Stock Market Index Analysis

The best thing going for the market right now is that last week's stumble was so bad, it sets the stage for a potential -- potential -- sympathy bounce. Even if we get it though, there's no assurance it will push the indexes up and over the major humps ahead.

We'll start the discussion with a close-up look at the daily chart of the S&P 500. Although it started last week on a bullish foot, it looks like traders had plans for the very beginning to sell into that strength. All it took was a kiss of the technical ceiling at 4096 early on Tuesday to kick-start a wave of selling that may have been in the cards well before the week got going. End result? The S&P 500 ended up tumbling to a close below its 50-day moving average line (purple) on Friday. There are no other support levels in play right now.

S&P 500 Daily Chart, with VIX and Volume

Source: TradeNavigator

If you're wondering, the volume surge stems from the fact that Friday was a triple-witching day, when a whole lot of options expire, forcing traders into action.

The daily chart of the NASDAQ Composite looks about the same, although it broke under its 50-day moving average line on Thursday and then put some distance between it and itself on Friday. Like the S&P 500, there's no support level that could readily offer support to the struggling index.

NASDAQ Composite Daily Chart, with VXN

Source: TradeNavigator

There is one shred of hope being served up by the Dow Jones Industrial Average. Even with last week's 2% selloff, the Dow remains above its now-converged 50-day (purple) and 200-day (green) moving average lines; Friday's low almost tested these levels as a floor.  

Dow Jones Industrial Average Daily Chart, with Volume

Source: TradeNavigator

This makes a fair amount of sense. The Dow Jones index outperformed others since hitting a major low in October, as traders have been seeking out safer, more reliable stocks as defense against brewing weakness. Marketwide weakness impacts all stocks though, even if not equally.

Whatever the case, the Dow is within striking distance of a key band of support between 32,200 and 32,600. If it moves under that floor, the other indices will certainly move lower with it. Moreover, that selling could spook the market into a more sustained and more serious plunge.

Then again, that plunge may well be the last one needed to drive a true capitulation.

The odd part about last week? Neither the VXN nor the VIX were catapulted higher despite the clear trouble the market was in. That's going to be part of any capitulation action. The fact that we haven't seen it happen yet underscores the idea that there's still a major downside move to be made before the ultimate bottom is in.

Don't be surprised if we see bullishness this week, perhaps bleeding into next week in anticipation of a Santa Claus rally. Just don't read too much into any of it though. Stocks showed us how vulnerable they are here. This isn't exactly the kind of environment you can afford to blindly bet on any bullishness -- at least not yet -- until the S&P 500 moves back above a major swath of resistance around 3990, consisting of several technical levels that used to be support lines.

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