The S&P closed at 2,099 for the fourth time in the last five days and this is either a jumping off point for a move higher or a tipping point for a move lower. The S&P closed at 2,099 for the fourth time in the last five days and this is either a jumping off point for a move higher or a tipping point for a move lower. The constant rebound to close at 2,099 could be seen as bullish except for the lack of conviction to punch through that level. Traders were able to buy the dip in a low volume market and lift it to that point but there were enough sellers waiting to prevent any further gains for four of the last five days.

Thursday was the only day it closed higher at 2,105 and I attribute that to short covering at the close ahead of the payroll report. Some shorts did not want to be caught on the wrong side of that data dump. In retrospect they missed a good decline.

There is not much in the way of economics in the week ahead but the Yellen economic speech on Monday could be a real spark for the market. If she comes out very gradualist and implies there will be no rate hikes for "several more months" which would take June and July off the calendar, the market could rally. However, the only reason she would do this is because the data is worsening. That is the case with almost every material economic report showing negative components. If she does this will bad news be bad news for the market or will traders see the weak economics as a market positive. Considering the minefield we have to traverse this summer, I would expect bad news to be bad news.

If she comes out with a more hawkish stance and retains the "coming months" phrase she used last week then the market could react negatively because traders would again begin to expect a rate hike sooner rather than later.

The market typically rises into a Yellen speech because of her dovish nature. That suggests we could see a gain at the open on Monday and then a sharp reaction to her comments. S&P futures are down -2 as I type this but that is a rounding error more than a market signal. It could be erased in seconds.

The events the following week with the FOMC meeting and the Brexit vote are sure to produce market volatility. The major volatility for the Brexit vote will come the following day as the market reacts to the results and it could be extreme if the UK votes to exit the EU. That risk is likely to keep a lid on the market until the vote.

The S&P is at levels where resistance has held on every test since July of last year. This is a significant resistance level but that does not mean it cannot be broken in the current low volume market. Short interest is high and any material spike could trigger another major short squeeze.

The Dow remains the weakest index and has not yet retested the strong resistance at 17,925 but it did punch through that for a couple days back in April before the big decline began. That breakout strengthened the resistance at 18,165 should we get back to that level.

The Dow does not have enough stocks from any one sector to power much higher on sector related news. The financials should be weak depending on what Yellen says. The energy stocks should be weak if oil prices continue to slide after OPEC did nothing at their meeting. The big cap tech stocks like Apple were giving up ground the last couple days on no specific news.

The Dow has no small caps or mid caps, which have been the strongest stocks over the last two weeks. It has no biotechs to drag it lower after the ASCO conference is over on Tuesday. What is does have is a lot of dividend payers and those may be in demand depending on Yellen's speech on Monday.

The biggest drag on the market next week could be the biotech stocks after a 16% gain over the last three weeks. The run up into the ASCO conference should fade and that will drag on the Nasdaq and the Russell 2000. It should also weigh on the S&P-400 Midcap index, which is the best performing index in the market.

I would continue to be cautious about new long positions ahead of a potential June Swoon. The months of June/July are not normally good for the market. June is typically flat to slightly positive in the first two weeks and peaks in option expiration week, then closes at the lows for the month. Give the FOMC meeting and the Brexit vote I would be surprised to see a major rally from here.

Jim Brown

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