The S&P 500 Index (SPX) rallied 12% last week, raising an interesting question: When did we last see the SPX exceed a weekly rally of 7%, and what happened during the subsequent months? I'll answer this question in a moment, but first, let's rewind to the week that preceded this historic one-week return in the S&P 500.  Two weeks ago, we experienced a 6.7% decline in the SPX, but an impressive late-Friday surge broke the selling fever on Wall Street as news hit that President-elect Barrack Obama would name Timothy Geithner as his Treasury Secretary. As a result, the SPX rallied back above its 2002 lows at 768.63 and its October 2007 half high at 788.05.  Moreover, and perhaps more importantly, the government came out with two additional measures last week to ease the credit crisis: the $200-million term asset-backed securities loan facility to help unclog consumer and small-business-related loans, and the $600-million government-sponsored entities purchase program designed to target mortgage-backed securities at Freddie Mac (nyse: FRE - news - people ) and Fannie Mae (nyse: FNM - news - people ).  The latter action pushed mortgage rates down, with the benchmark 30-year fixed rate at 5.76% heading into Friday, down from 6.77% only four weeks ago. Plummeting mortgage rates are the first major tailwind for the housing sector in quite a while.  The culmination of bottled-up fear in the market and the government action resulted in a huge rally in the SPX last week, further justifying our advice about positioning oneself for an "anything can happen" outcome.  Historically, the bulls can garner some encouragement from last week's price action. When the SPX notches a one-week gain of 7% or more, the following three weeks to three months have proven extremely bullish for stocks. Specifically, the SPX returns, on average, between 2.47% and 9.13% during the three-week to three-month time frames following a move of 7% or greater.  So, could we see a repeat of these types of returns in the weeks and months ahead? Most certainly, as we saw some heightened fear ahead of a catalyst that created a tailwind for the housing and refinance market. At the same time, keep in mind that volatility in the market is at historic highs, so exaggerated short-term moves may be less meaningful in their implications. Also, the new measures designed to address asset-backed loans and mortgage-related securities are not due to launch until February 2009.  With the aforementioned tailwinds in mind, the issue of hedge-fund redemptions still looms. In the blink of an eye, forced selling could once again engulf the market, sending stocks spiraling lower. As we enter this week, we see potential resistance for the SPX at the 965 level, site of its 50-day moving average.  Last month's high at 1,000 is also a level at which sellers could emerge. On the downside, the 850 level on the SPX could be supportive on pullbacks, as this marks the site of the October lows. Should 850 break, we would prepare for a retest in the 768 or 788 levels, site of the 2002 low and half-high of October 2007, respectively.  If you are looking for a sector to dip your toes in on the long side, we would recommend the housing sector, with stocks such as Meritage Homes (nyse: MTH - news - people ) and Toll Brothers (nyse: TOL - news - people ) rising to the top. Meanwhile, continue to avoid energy, technology and pharmaceutical stocks.  Here is a brief list of some of the key events for the upcoming week. All earnings dates listed below are tentative and subject to change. Please check with the respective company Web sites for official reporting dates.  Tuesday: Data is light on Tuesday, with only November's automobile and truck sales slated for release. In earnings news, Beazer Homes (nyse: BZH - news - people ), Solarfun Power (nasdaq: SOLF - news - people ), Marvell Technology Group (nasdaq: MRVL - news - people ) and OmniVision Technologies (nasdaq: OVTI - news - people ) are scheduled to release their quarterly reports.  Wednesday: The economic calendar heats up on Wednesday as the November ADP Employment report, the revised third-quarter productivity report, the ISM services index and the Fed's Beige Book are scheduled for release. In earnings news, Del Monte (nyse: DLM - news - people ), Aeropostale (nyse: ARO - news - people ), Collective Brands (nyse: PSS - news - people ) and Jo-Ann Stores (nyse: JASA - news - people ) are scheduled to release their quarterly reports.  Thursday: The pressure lightens up on Thursday, as only weekly initial jobless claims and October's factory orders are on tap. In earnings news, Toll Brothers, Williams-Sonoma (nyse: WSM - news - people ), Guess (nyse: GES - news - people ), Novell (nasdaq: NOVL - news - people ) and Wind River (nasdaq: WIND - news - people ) are scheduled to release their quarterly reports.  Friday: All eyes will be on Friday's economic data, with the release of November's nonfarm payrolls, the unemployment rate, hourly earnings and average workweek. Capping off the day, October's consumer credit report is slated to hit the Street. In earnings news, Blyth Industries (nyse: BTH - news - people ) is scheduled to release its quarterly reports.  Click here for more ideas and recommendations, and to learn more about Bernie Schaeffer's Option Advisor.
After the market consolidates last week's gains, we could get a little lift heading toward the end of the year.