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Summary: U.S. stocks traded with volatility during Friday's trading session, eventually closing slightly higher. With the day's gains, the S&P 500 reached its highest closing level since mid-August of last year. The Dow Jones Industrial Average (DJIA) was near its highest level since early May.

Fundamentals

The three major U.S. stock indexes closed slightly above their pre-opening levels on Friday. The Nasdaq gained 20.62 points, or 0.2%, to 13,259.14; the S&P 500 gained 4.93 points, or 0.1%, to 4,298.86; and the DJIA gained 43.17 points, or 0.1%, to 33,876.78.

Last week, the Nasdaq was up a modest 0.1% overall, while the DJIA and S&P 500 were up 0.3% and 0.4%, respectively.

The continued strength on Wall Street may reflect, in part, continued optimism that the Fed will suspend its recent rate hikes after next week's monetary policy meeting.

A report on Thursday (8th) showed that initial jobless claims for the week of June 1 jumped to the highest level since October 2021, fueling optimism that the Fed will pause interest rate hikes as it has warned about the impact of a tight labor market.

This week, important inflation reports could also be a focus as the data may have significant implications for interest rate prospects.

The CME Group's FedWatch tool now shows a 71.2% chance that the Fed will leave rates unchanged this week, but a 53.0% chance of another 25-basis-point rate hike in July.

U.S. stock futures rose on Monday. Despite escalating warnings of an economic downturn, the S&P 500 index has risen 20% from its low point in October last year, joining the ranks of technically-defined bull markets in Europe and Asia. Short-term interest rates are still higher than long-term rates, suggesting that some investors expect a recession, which in turn could hurt corporate profits and portend a risky environment for stocks.

The stock market is currently facing adverse factors such as slowing economic growth, rising interest rates, and the expected issuance of a large number of new debt securities by the U.S. Treasury, which would drain market funds. However, these obstacles are not yet severe or imminent enough to deter buyers.

Technical Analysis

The DJIA hovered below 33,900 on Friday, in line with a series of recent lower highs. On the downside, the downward-sloping resistance lines drawn on December 13, 2022, and May 1, 2023, along with the mentioned level, are limiting further upside momentum, potentially leading the index into a range-bound phase as investors try to determine their next moves, particularly amid significant gains in other major stock indexes.

With the Average Directional Movement Index (ADX) confirming that this is a trendless market and the Relative Strength Index (RSI) hovering near its neutral 50 level, the onus falls on the Stochastic Oscillator to give some hint of momentum.

The indicator has just entered overbought territory and it may stay there for a while before signaling a possible next move, but such momentum would be positive. In the meantime, as mentioned above, the constant upward movement of a series of highs will only exacerbate the difficulty of the upside. In other words, the upside potential is limited, but opportunities still exist. In terms of trading strategy, buying the dips should be the primary approach.

Trading Recommendations

Trading Direction: Long

Entry Price: 33800

Target Price: 34043

Stop Loss: 33400

Valid Until: 2022-06-26 23:55:00

Support: 33785, 33712, 33406

Resistance: 33973, 34055, 34110