Traders will look for reassurances this week that the world's second-biggest economy is still strong, while also watching for a catalyst that can push markets higher this summer.
"Itâ€™s China week," said Colin Cieszynski, a senior analyst at CMC Markets.
Traders will await a full slate of data from China, including trade numbers that are being released during the weekend in time for the North American market open on Monday. China releases the latest inflation readings on Monday and industrial production and retail sales numbers later in the week.
Analysts expect the economic data to be generally positive.
"We're still cautious on China because they are deliberately trying to soften their growth rate and deal with the pollution," said Wes Mills, a chief investment officer with Scotia Private Client Group.
"I don't think youâ€˜re going to see terribly robust numbers and theyâ€˜re OK with these 7.2, 7.3 per cent (growth target) kind of numbers I think. And on the trade side, weâ€˜re starting to see its currency weaken a little here to help out the trade side."
And while the China numbers might not provide that element to push stocks higher, it should at least help cement the strong gains seen on the TSX this year.
The TSX ended last week up 234 points or 1.6 per cent, leaving the Toronto market ahead 8.9 per cent year to date, led by gains in energy, mining and financials.
U.S. markets also gained ground last week with the Dow industrials ahead 1.24 per cent.
Gains last week were partly driven by relief that the European Central Bank is taking extraordinary measures to deal with the threat of deflation and a sagging economic recovery.
The ECB announced that itâ€™s cutting its lending rate to 0.15 per cent from 0.25 per cent. It is also dropping its overnight deposit rate to minus 0.1 per cent from zero. Charging banks for parking funds with the ECB is an unusual step aimed at pushing banks to lend that money rather than hoard it.
The ECB will also consider more unconventional measures to boost inflation if it stays too low. A deflationary spiral would choke off growth and worries about such a scenario increased earlier last week with the release of data showing that inflation in the eurozone came in at only 0.5 per cent in May, down from 0.7 per cent in April.
"I would agree that the market is grinding higher but weâ€™re now through first quarter earnings and weâ€™re in a situation where the central banks have given us their juice and weâ€™re heading into what is normally summer doldrums," said Mills.
"There is a lot of complacency, weâ€™ve been a long time without a major correction and so there is cash on the sidelines. I know of small shops that are 20 per cent cash right now."
Meanwhile, it is expected to be a very quiet week for North American economic data.
The only major American report is the May reading on retail sales on Thursday.
"January and February were awful, March and April you had a rebound and what people are trying to figure out now is, how much of that was just a catchup on pentup demand and how much was actual real growth following through into the spring," added Cieszynski.
"Did we have a big bump in March and April, then things slow down again or is May getting follow through?"
In Canada, traders look to the May reading for housing starts on Monday and April manufacturing shipments on Friday.