This Week May Not Be as Good as the Last

NEW YORK ( TheStreet) -- Last week was a good week for the U.S. stock market and its major indexes. However, macro-economic data and technical factors put a potential damper on this week. Last week's gains need followthrough before the bulls can celebrate new highs.

For the week, the S&P 500 gained 1.7%, the Nasdaq Composite climbed 2.3% and the Dow Jones Industrial Average added 1%.

All three major stock market indexes and their related ETFs -- SPDR S&P 500 ETF Trust ( SPY), PowerShares QQQ Trust, Series 1 ( QQQ) and SPDR Dow Jones Industrial Average ETF ( DIA)remain below their recently recorded all time highs which now demarcate significant resistance levels.

Tech Talk

In the chart of the S&P 500 below, we can see how the stock market index is near overbought conditions with RSI at 66.79 and momentum is declining as MACD turns south. This sets up a divergence between momentum and the recent rally back to significant resistance levels and typically these divergences are resolved in one direction or other.

With major resistance at the 1600 level, just above current price, the most likely resolution is down as the S&P makes another stab at its all time high of 1593 set on April 11. Should that directional correction unfold, Fibonacci retracement levels find support between 1530 and 1550 so the likely parameters for an initial correction fall between 5% -12%.

Chart courtesy of StockCharts.com

The Big Gorillas in the Room: Oil and Energy Rally

Oil and energy ETFs, Energy Select SPDR ( XLE) rose significantly last week, likely in response to fewer unemployment claims and renewed hope for global economic growth. Oil was up more than 5% as West Texas Intermediate Crude closed at $92.90 per barrel.

VIX Croaks Again

The VIX Index, the CBOE S&P 500 Volatility Index, also known as the "fear index," declined sharply last week in response to higher equity prices and fewer unemployment claims. The VIX Index lost 9.08% for the week to close at 13.61,while the iPath S&P 500 VIX Short Term Futures ETN ( VXX) lost 5.87% and the VelocityShares Inverse VIX ETN ( XIV) added 5.92%.

Markets remain decidedly complacent and fearless in the face of a global macro economic slowdown and weakening technical factors.

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