Craig Johnson’s

Stock Market Recap for Last Week– Weakness in stocks during the last few days of May and into the first few days of June put the stock market’s uptrend under pressure. The decline drove the market from deeply overbought to just below neutral. The stock market, after dropping Thursday morning, reversed direction in the afternoon propelling market indices and most stocks to a higher close. Friday’s employment numbers for May provided just what the market pundits were looking for, a number that wasn’t too strong and not too weak. This led to a powerful rally on Friday as the middle ground report didn’t provide any evidence that the Federal Reserve would end their bond buying program. It is believed that the recent pullback was the market discounting the possibility that the Federal Reserve is likely to taper the massive size of their monthly bond buying program over time. Besides tapering the size of the bond buying there is no indication that the program is going to be terminated any time soon.

Current Outlook and Comment – The S&P 500 closed at 1643.38, while the Dow Jones Industrial Average closed the week at 15,248.12. I mentioned last week that, “On May 22, market indices hit intra-day highs and then reversed closing lower by 1% for the day. This price action has put traders on edge since that day. As of Friday’s close those intraday highs haven’t been exceeded. The reason that traders are concerned about this turn of events is that this rare event occurred just before the market declines of 2000 and 2007. New intraday highs in the coming weeks would eliminate this worry, but until that occurs traders will likely remain concerned.” Even with Friday’s rally the indices have a ways to go before they exceed the May 22 highs. This has caused a higher level of volatility in the market, as traders who are wanting to trade long or short the market, try to position in front of every move higher or lower expecting a significant decline or advance to take place. For now, support on the Dow Jones Industrial Average is near 14,800 and near 1,600 on the S&P 500.