The dog days of August are finally here, but markets could be volatile in the week ahead as focus shifts away from the Fed and possibly to Russia and Ukraine at the beginning of the week.
Traders are also watching the key 2,000 level on the , just points away from Friday's 1,988 close.
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"I would think that certainly has to be in the crosshairs, unless we get something disturbing over the weekend," said Mark Luschini, chief investment strategist at Janney Montgomery. "It seems to me that's logical. It may bump up against it and get some resistance, like we did at 1,987 this week. We have clear air space, and I just don't see any economic news next week that dramatic that it would alter that glide path."
But without any top tier data and with thinly staffed trading desks, geopolitical headlines could dominate the final days of August. Russian President Vladimir Putin and Ukraine President Petro Poroshenko are scheduled to meet Tuesday in Minsk. NATO comments about Russian trucks entering Ukraine unsettled markets Friday.
The past week was all about central bankers, as traders awaited Friday's Jackson Hole speech by Fed Chair Janet Yellen. As expected, Yellen was dovish on policy but she also sent yields higher, when she said the Fed was getting closer to meeting its objectives and carefully detailed both sides of the economic debate on labor slack.
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Stocks finished out the week with solid gains, in the best weekly performance since April. The S&P 500 gaining 1.7 percent, and the Dow was up more than 2 percent at 17,001. The Nasdaq was up 1.7 percent at 4,538.
Friday already was a light trading day. In fact, it was the lowest volume for a full day of trading this year at just 2.29 billion shares traded at the NYSE.
Luschini said the market will be vulnerable to a little more volatility because of the light turnout expected on Wall Street next week. "We could see the market blast higher and get 1 to 2 percent tacked on just because there's not enough activity on both sides of the trade to change direction," he said.
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Andrew Burkly, head of institutional portfolio strategy at Oppenheimer Asset Management, said the S&P at 2,000 would be important and could bring in buying. "These round numbers have meant something. 1,900 was a pretty good ceiling, and as we broke through it, it became a pretty good floor. We've had a hard time getting over these levels, but once we do they provide support," he said.
There are some economic reports in the coming week, including new home sales Monday and S&P/Case-Shiller home prices Tuesday. Stock traders will be watching those numbers carefully, after a surge in home builder stocks. The XHB, SPDR S&P Home builders ETF was up 4.5 percent in the past week.
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Durable goods are reported Tuesday and a second reading of second-quarter GDP is on Thursday. Burkly said the reports are secondary, and the market will start to anticipate the more important reports due in the week after Labor Day—including ISM and the August jobs report.
"Next week will be one of the sparcest of the summer," Burkly said.
The dollar index gained more than 1 percent in the past week, gaining momentum against the euro and yen for its best weekly performance since November.
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The green back was helped by the view that central bank policy is diverging, and the Fed will move sooner to tighten than other central banks. For the most part, Yellen's comments did not move Wall Street from the consensus view that the Fed will start raising interest rates in the middle of next year.
"The dollar rallied and I think it could remain strong," said Vasilly Serebriakov, currency strategist at BNP Paribas. "I think we'll be watching the front end of the yield curve in the U.S. closely. Unless the two-year gets over 50 basis points, it will be hard for the dollar to keep rallying." The two-year touched 0.50 percent for a brief period on Friday, as traders perceived Yellen's more balanced approach as slightly more hawkish.
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What to watch
10:00 a.m.: New home sales
10:30 a.m.: Dallas Fed survey
Earnings: Best Buy, Bank of Montreal, Aruba Networks, Trina Solar, Smith and Wesson, Sanderson Farms, Bob Evans, WPP
8:30 a.m.: Durable goods
9:00 a.m.: S&P/Case-Shiller home prices
9:00 a.m.: FHFA home prices
10:00 a.m.: Consumer confidence
10:00 am Richmond Fed survey
1:00 p.m.: $29 billion 2-year auction
Earnings: Brown Forman, Chico's, Tiffany, Williams-Sonoma
1:00 p.m.: $35 billion 5-year auction
Earnings: Dollar General, Splunk, Abercrombie and Fitch, Toronto Dominion, Pall Corp, Signet, Canadian Imperial Bank
8:30 a.m.: Initial claims
8:30 a.m.: Q2 GDP (second reading)
10:00 a.m.: Pending home sales
11:00 a.m.: Kansas City Fed survey
1:00 p.m.: $29 7-year note auction
8:30 a.m.: Personal income/spending
9:45 a.m.: Chicago PMI
9:55 a.m.: Consumer sentiment
—By CNBC's Patti Domm