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NEW YORK (CNN/Money) -
Not to kick a market when it's struggling, but if history is any guide, June is just going to get tougher.
The Dow and Nasdaq are modestly lower for June and the S&P 500 is flat. But all three may face strong headwinds for the rest of the month, including the quarterly expiration of options and futures and the tendency for June weakness the year after a presidential election.
As if that weren't enough, Federal Reserve policy-makers are set to end their next meeting, a two-day affair, on the last day of the month -- something that always sets investors on edge.
"You're dealing with a seasonal period that's less favorable for markets and you're also dealing with end of quarter portfolio issues," said Jeffrey Hirsch, editor of the Stock Trader's Almanac, noting the end of the month also caps the second quarter and the first half of 2005.
The month will also will be tough after the market's recent rally.
Stocks may have gotten "overbought on a technical basis," said Paul Mendelsohn, chief investment strategist at money manager Windham Financial Services.
There is some good news: the Nasdaq tends to do a little better than its blue-chip counterparts in June, and that's been the case so far. In addition, the stock market tends to celebrate the 4th of July with the rest of us: the end of June through the first week or so of July is often strong for the three major indexes.
Meanwhile, some analysts say that June could actually end up higher due to ongoing pessimism in the market -- the so-called contrarian indicator. Stocks basically gained from mid-April through the end of May, recovering from weakness in February and March.
"Investors remain skeptical of the rally that began in April," said Ken Tower, chief market strategist at CyberTrader. "Therefore, the rally could restart."
Here's a look at what's in store.
'Witches,' bears and the Fed
Four Fridays a year the stars align and bring upon the market a day known as "Triple Witching" that should now more accurately be called "Quadruple Witching."
It's the day when stocks index futures and options, and individual stock futures and options all expire simultaneously. The next one is Friday June 17th.
The expiration days and the sessions leading up to them tend to be volatile, as investors either exercise their positions or roll them forward at the last minute.
CyberTrader's Tower says the "witching" effect tends to be more spread out than it was a decade or so ago, when it made the market extremely volatile on expiration days.
Still, of the four quarters, the "witching" week in the second and third quarter of each year tends to be worse than either the first or the fourth.
Over the last 15 years, the expiration week in June has been a loser for the Dow industrials and the S&P 500 about half the time, according to the Almanac. The week afterward was a downer for blue chips 13 of the last 15 years regardless of what happened during the "witching" week.
The effect of the options expiration week on the Nasdaq is less clear, the Almanac's Hirsch noted, since techs tend to hold up in June.
Then there's the election cycle. Since 1971, the year the Nasdaq market started, the Dow has fallen 1.2 percent and the S&P 500 has slipped 0.8 percent, on average, in June in the year after a presidential election. The Nasdaq, on the other hand, rose 0.6 percent.
Not a post-election year? The Dow rose 0.4 percent, the S&P 500 gained 0.8 percent and the Nasdaq gained 1.3 percent in June, on average, over that period.
But post-election year or not, the market may be hard-pressed to rally any further ahead of the next Fed meeting.
The central bank is widely expected to boost interest rates another quarter-point when policy-makers end their two-day meeting on June 30 -- a likelihood made all the more clear by comments from Chairman Alan Greenspan Thursday.
But uncertainty over how aggressive the Fed will be after the June meeting could contribute to paralysis for stocks this month.
Fireworks for fourth of July?
As the end of June approaches, though, things may start looking up.
Since about 1987, the last three trading days of June and the first nine of July have been good for an average Nasdaq gain of 3.1 percent, according to the Almanac's Hirsch.
Other positives that may help temper the negatives this June? "Energy is likely to be a long-term bull market," said Paul Levine, president at money manager Lifetime Financial Strategies. "Gold, too."
Although Levine said Wall Street seems to be near the start of a "secular bear market" -- when stocks are mostly range-bound -- what may support stocks in the short run is if the yield on the 10-year Treasury keeps falling.
Lower Treasury yields by themselves can make stocks more attractive to investors. But Levine noted that low yields could also give another boost to consumer spending if mortgage rates keep falling -- giving a lift to economic growth, and corporate profits.
That may help what promises to be an otherwise ugly June.
For other reasons tech stocks may do well this summer, click here.
For more on Intel's recent boost to its forecast, click here.
And for summer stock winners and losers, click here.
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