This week will be important for anyone who wants the stocks sell off to be over and the week after could be even more important, with expectations that an oil deal between OPEC and the likes of Russia is supposed to be finalized — either way! — by March 1. In between and especially this week it will be a big test to see if the stock markets that rebounded last week can consolidate around these levels and resist giving into gravity.

Remember, we briefly entered a bear market losing over 20% since March of last year but in the US, Wall Street has only had a correction, so we have to hope that the Yanks don’t head into bear territory. That’s when it will get really serious.

On the local front, the foundations for stock price consolidation is looking good, with oil prices not tumbling and iron ore prices spiking last week, up 11.2% — who saw that coming? This is timely, with BHP reporting on Tuesday and there is a swag of bellwether companies showing and telling over the next five days, including Wesfarmers (WES), Woolworths (WOW), Oil Search (OSH), Qantas (QAN) and Brambles (BXB). Brambles reported today and upped guidance, which saw its share price spike by over 8%.

It comes with earnings season looking miles better than the experts have been predicting. AMP’s Shane Oliver, says 68% of companies have seen their profits up on a year ago and 69% have raised their dividends relative to a year ago, against a norm of 62%.

It also comes as our economy is looking much better than the expert doomsday merchants were predicting. If you don’t believe me, have a look at my story on the economy and whether Malcolm is an economic dud on www.switzer.com.au today.

If you could rule out international developments, I could be certain that stocks could consolidate from here but we can’t, so I’m looking for the curve balls that could stop our stock market hitting a homer in coming weeks.

One regular emailer, who calls himself the ‘Dude’ and who I taught before he headed off overseas for a life in investment banking and trading, says he expects a “shocker” this week, so I’m looking for possible triggers. These guys can get it wrong but they do believe in their big calls and sometimes can be on the money.

So what could rock stocks this week? And how likely are these rock issues?

• Any bad news on the oil deal could take the oil price down and the S&P 500’s correlation with this crucial commodity says it would be bad for stocks;
• There is a lot of US economic data out, including the Markit PMI reading for manufacturing on Monday and then for the services sector on Wednesday. The testing of the US economy can really hit stocks either way, where really good news could make smarties argue that it puts more interest rate rises on the table, which could hurt stocks. We have a Goldilocks dilemma in the US, where good news means rate rises and that can hit stocks, while bad news means less rate rises and should be good for stocks. I suspect OK news, which says rate rises will be one or two rather than four, would be best but it’s still crazy when good economic news means stock prices down! That stupidity has to change and that’s when stocks will boom; and
• Europe has Markit PMIs as well and this will be watched ahead of the next European Central Bank meeting in early March, where markets are expecting Mario Draghi to come up with more monetary stimulus.

Back home again, we see data on construction and business investment, which hopefully will add to the improving economic picture.

The only really scary news out there is the fact that options positions on the S&P 500 indicates that there is a 50% chance that the index will see 1600 by year’s end. Where that index is now suggests about another 20% stock price slide!

So huge negativity is a one in two chance by year’s end but I guess so is huge positivity. You do have to remember that most fund managers are long only players but they will take out options on the index for insurance in case the market moves against them, so there is a bias to negativity with these option plays.

Mike Khouw, an options trader told CNBC: “Downside tends to be overstated in general, but it’s still fair to say that the options market is pricing in the probability for fairly significant declines from here.”

Obviously, Chinese economic data will always be a market mover but the oil deal is my main focus so we can see some stability in oil prices.

I don’t want them to shoot through the roof but I don’t want them collapsing and taking stocks with them.

Bloomberg says progress is happening with a well-placed Russian official at the meeting of OPEC, Russia and others coming out with this positive statement: “Those countries which have openly supported this approach are producing around 75 percent out of global (oil) export volumes. My point is that, in practice, this is enough to agree.”

That’s the case for consolidation of stocks this week and also for the creation of a platform, which could see stocks head higher.

That said, there are plenty of curve balls out there, so my job is to be on watch.

However, at this stage, I can’t see why the Dude will be right this week.

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