hi there, what you have described soounds like a sebaceous cyst
which has got infected giving rise to the foul smelling discharge and the small furuncle
around it. You should consult a surgeon and if required get it excised and a course of antibiotics will take care of the rash
around the cyst. If not then just a course of antibiotics may be a good start. In future do not squeeze such swellings but get it surgically drained as they may lead to cellulitis
in extreme cases and may leave a scar on healing which might be quite unsightly if on the exposed part of the skin, take caare.