The S&P 500 (SPX) gave up some ground on Tuesday, a needed respite from three days of big gains, states Jon Markman, editor of Strategic Advantage.
The benchmark index finished 0.6% lower at 4,132. Bulls are in the process of building a tradable bottom.
Pullbacks are important because they test the mettle of previous buyers. Buyers regrouped Tuesday on two separate occasions as the S&P 500 tested the 4,100 level. Unless there is a negative overnight development, bulls should be ready to make a run at the next overhead resistance points at 4,175 and 4,270. The latter level represents the falling 50-day moving average. I’m not making the case that bulls are completely out of the woods.
Clearly, the larger trend remains bearish until bulls can retake critical resistance in the 4,450 area. However, bears are likely to concede a near-term kickback rally.
That advance could last this week and next and work off some of the bearish sentiment that has been so dominant for two months. Important support is 4,065 on a closing basis.
SA TradeView: Our ProShares UltraShort S&P 500 (SDS) position rose 1.1% Tuesday. Target (TGT) is $45.30; stop is $42.00 (after 11:00 am ET); the Tuesday close was $43.19.
The Upshot
The Dow (DOW) fell by 0.7% to 32,990.12 and the Nasdaq (NDX) was 0.4% lower at 12,081.39. The S&P and the Dow closed the month little changed while the Nasdaq was 2.1% lower after registering a hellacious 13% retreat in April.
Energy and materials were the biggest decliners while consumer discretionary and communication services were the only decliners. The US ten-year yield rose 10.2 basis points to 2.85%. West Texas Intermediate crude oil futures added $0.05 to $115.02 a barrel.
Breadth favored decliners 2-1, and there were 189 new highs vs 87 new lows. Big caps on the new high list included Exxon Mobil (XOM), Chevron (CVX), Shell (SHEL), ConocoPhillips (COP), and Cigna (CI). Energy continues to rule.
US consumer confidence declined to 106.4 in May from 108.6 in April but stood above 103.5 expected. "As always, remember that sentiment and spending are not the same thing, and we have no experience of how these surveys behave when consumers have huge piles of excess savings, accumulated during Covid," chief economist Ian Shepherdson said. "So far, they have been willing to dip into these savings despite reporting that they feel less positive."
The Chicago PMI rose to 60.3 in May from 56.4 in April while the Dallas Fed's manufacturing survey fell to -7.3 in May from +1.1 in April. Other manufacturing data already released have been mixed. The ISM's national index will be released on June first.
Mosaic (MOS) was the biggest gainer on the S&P 500, up almost 5% after Piper Sandler adjusted the company's price target to $85 from $80 and reiterated its overweight rating.
In other company news, Snapchat (SNAP) declined 9.4% after a Vertical Research downgrade of the camera and social media company to negative from buy while Credit Suisse cut its price target for Snap shares by $18 to $59 apiece. The moves follow Snap last week's warning that its second-quarter revenue will likely lag its prior forecast expecting a 20% to 25% increase over year-ago levels.
