Coming Week: Bullish After Memorial Day

After investors enjoy a long weekend courtesy of the Memorial Day holiday, they will be greeted upon their return by a flood of economic data, with most reports expected to be negative.

In recent weeks, the decline in economic data has slowed, but data continue to be weak with very little sign of improvement, leading many traders to wonder when a marked improvement will come. Despite this, market analysts say next week could end with gains, if history is any indication.

Ryan Detrick, senior technical strategist with Schaeffer's Investment Research, says that while the market is trapped technically between 875 and 940 on the S&P 500, the Memorial Day week could give bulls something to cheer.

"We did a study and found that going back the past 10 years, Memorial Day week is actually very bullish," Detrick said. "The past 10 years the S&P 500 has averaged 1.33% and is higher seven out of 10 times, including the past three."

While 1.33% may not seem all that significant, Detrick said that over the last 10 years, the average weekly return has been slightly negative at 0.04%, and just over half of those 522 weeks have been positive.

Still, there may not be a lot of room to run, according to the technicals. While 875 will serve as support on the S&P 500 for the recent breakout, Detrick said that the 940 high "will be tough to break out of."

Earnings and Economic Data

Several economic reports will be in focus over the four trading sessions next week, with a wide range of data that will give traders a glimpse into the health of the housing and job markets, as well as how the consumer is holding up.