In spite of starting on the downside, markets managed to eke out gains last week, with the S&P 500 SPY +0.45%  gaining a fraction of a percent, behind the prior weeks’ strong gains.

Headline risks from Europe and the U.S. fiscal-cliff are being offset by stronger U.S. GDP data, home sales and consumer confidence figures.

As of Friday, 206 stocks within the S&P 500 have positive momentum (up from 48 three weeks ago), while 28 have negative momentum.

This week at a glance:

Monday:

• Moody’s downgrade of the ESM and ESFS is likely to weigh on markets.
• ISM manufacturing data and construction spending should provide further evidence of a strengthening US economy.
• Motor vehicle sales are set to be released.

Wednesday:

• The ADP employment report, factory orders and ISM non-manufacturing reports are all on tap.
• It will also be an active international data day, as economic news from Europe and China are on tap. There is a significant possibility of added volatility.

Thursday:

• Jobless Claims figures will be released.

Friday:

• The retail sales report should overshadow the employment report. It’s not been an easy road for retailers so far. Of the 28 stocks that have negative momentum (within the S&P 500) 8 are retail stocks — the biggest percentage share.

The Trade:

Although market and economic fundamentals are improving, political risks are increasing. As such, investors should look at some January SPY 140 Puts to help reduce volatility (don’t forget to take profits on any significant market sell off) and take the opportunity to sell weaker names in your portfolio when the market rallies.