The market didn't end last week on a high note. But, it doesn't exactly matter. It did so well through the first four trading days of the week that all the indices are now well above key technical ceilings... a concern we voiced on Tuesday when the bullish effort was fizzling out.

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Although the odds of at least a little profit-taking are now further heightened, any such pullback is now poised to find a floor at levels that will leave the bigger-picture rally intact.

We'll show you exactly what that means in a moment. First, however, let's recap last week big economic announcements (and there were plenty of them) and preview what's coming this holiday-shortened week.

Economic Data Analysis

Last week's big news, of course, was the Fed's decision to keep the Fed Funds Rate at its current levels... at least for now. The FOMC still anticipates a couple more quarter-point rate hikes before the end of the year. But, it's happy enough now with the way inflation is being tamed to stand pat. It's possible the outlook for a couple more interest rate increases later this year is more posturing than an actual threat, meant to keep investors respectful of the possibility (and act accordingly).

The specifics? The overall consumer inflation rate now stands at a two-year low of 4.0%. It's still 5.3% on a core (ex-food and ex-energy basis), yet that's still lower than the recent norm. The picture's even better for producers (factories and assemblers). Producers' prices were up 1.1% year over year in May, or up a still-modest 2.8% when not considering energy and food/commodity costs... also multi-month lows.

Inflation Rate (Annualized) Charts

Source: Bureau of Labor Statistics, TradeStation

The Federal Reserve's decision to hold interest rates at current levels also makes sense in light of last month's factory output and capacity utilization. Both rolled in at around the same levels as April, which is a win of sorts. But, some growth from both would clearly be the better, more bullish situation.

Capacity Utilization and Industrial Productivity Charts

Source: Federal Reserve, TradeStation

Finally, last month's retail spending showed a measurable improvement from April's levels, although growth is still slowing. Partially chalk it up to inflation taking a toll, but higher interest rates as well, along with the broad economic malaise we tend to get with both. Moreover, notice how retail spending has essentially stagnated since the middle of last year.

Retail Sales Charts

Source: Census Bureau, TradeStation

Everything else is on the grid.

Economic Calendar

Source: Briefing.com

This week kicks off a wave of real estate reports.

That party starts on Tuesday with a look at last month's housing starts and building permits. The expected numbers more or less align with April's data, although both are still on the defensive.

Housing Starts, Building Permits Charts

Source: Census Bureau, TradeStation

Then on Thursday we'll get May's sales of existing homes. The pros believe they'll come in at a pace pf 4.28 million again. That won't even come close to snapping the bigger-picture downtrend.

Home Sales Charts

Source: National Board of Realtors, Census Bureau, TradeStation

New home sales won't be released until next week, although the generally move in tandem with existing home sales numbers. Of course, that's not been the case in recent months. Interpret that as a sign that people who already own a home are keeping that home, or perhaps keeping their relatively low interest payments.

Stock Market Index Analysis

This week's analysis kicks off with a look at the weekly chart of the Nasdaq Composite, as this tells us 95% of all we need to know right now. The index is now firmly above what started to look like a technical ceiling around 13,170, where it also peaked in August of last year. The composite is now 33% above the double bottom at 10,263, which may well be the bear market low.

Nasdaq Composite Weekly Chart, with VXN

Source: TradeNavigator

It's not the ideal bullish scenario. That 33% bounce has taken shape in about half a year... too much, too fast, some would say. It's also up 12% in just the past five weeks. Both leave the composite at above-average risk of profit-taking. The volatility index (VXN) also remains near uncomfortably-low levels that could easily tilt things in a bearish direction.

Even so, even a "big" stumble from here would likely end before any serious damage to the bigger bullish effort could be done. A 10% tumble would only pull the composite to the 12,320 level, which is still above the 100-day moving average line (gray) and still above what for a short while was a ceiling at 12,226. That's serviceable.

And there's certainly good reason to at least prepare for that possibility.

Here's the daily chart of the Nasdaq Composite. Things were going incredibly well all the way through Thursday, when the index logged its best close since early last year. The shape and placement of Friday's bar was something of a message though. The open was even more bullish than Thursday's close, but the close was in the red as well as at the low for the day. Traders clearly didn't want to stick with stocks heading into the long weekend. (The daily chart also puts the divergence since mid-May. The Nasdaq is now 18.4% above its 200-day moving line. That's about its maximum degree of separation, and it usually ends with a pullback sooner than later.)

Nasdaq Composite Daily Chart, with VXN

Source: TradeNavigator

It's the same basic story for the S&P 500. It's been roaring higher as well, but started waving a bit of a red flag on Friday while its volatility index (VXN) slipped to its lowest close in many months. Like the Nasdaq, the recent rally has pushed its divergence limits. Also like the Nasdaq though, there's all kinds of technical support below to stop any selloff before it gets going in earnest.

S&P 500 Daily Chart, with VIX

Source: TradeNavigator

Perhaps the most encouraging chart, however, is the daily chart of the Dow Jones Industrial Average.

We mentioned at the site last week that the Dow was the only index that hadn't yet punched through a major technical ceiling. That's changed in the meantime. The blue chip index ticked a little bit above a falling resistance line (thick, blue) on Tuesday, and although it fell back under that ceiling on Wednesday, by Thursday it was back above it as well as above the horizontal ceiling at 34,313. Friday's slide didn't really pull the index meaningfully below that ceiling.

Dow Jones Industrial Average Daily Chart

Source: TradeNavigator

And on something of a side note, notice how the Dow Jones Industrial Average has been getting squeezed into a converging wedge for months now. At the same time, all of its moving average lines are nearly fully intercepted. This sets the stage for an explosive to un-converge... well, everything. That's bullish, even if such a move will require the market peeling back a bit first to get a running start.

The point is, don't panic (too much) if we see the market fall back a little bit here. That may be the best thing for the bulls, in fact. Just make sure all the indices end up finding support where they're supposed to. In most cases, that's their intermediate-term moving average lines like the 50-day and 100-day moving averages.

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