Traders brought in June much the way they left May, with extreme volatility, states Jon Markman, editor of Strategic Advantage.

The S&P 500 (SPX) jumped sharply higher out of the gate, only to collapse to a large deficit by mid-morning. A big rally in the late afternoon nearly eased the morning losses, before renewed selling into the close. The benchmark index finished at 4,101, a loss of 0.75%.

Wednesday’s volatility did not answer any big questions. Bulls were beaten back as they tried to push through minor resistance at 4,150. Yet bears were also rebuffed. Two attempts to recapture the 20-day moving average down at 4,070 failed miserably. While this is a long-term bearish trend, bulls have an opportunity to make some tracks on the upside. However, on Thursday they must push through 4,150.

Assuming that strength develops, the next important overhead resistance point is the 50-day moving average, now at 4,265. I expect bears to reload at that point. In the absence of early strength on Thursday, there is critical support at 4,070. If that level fails, expect a decline to 3,950 in short order.

SA TradeView: Our ProShares UltraShort S&P 500 (SDS) position rose 1.7% Wednesday to $43.92. Target is $45.30; stop is $42.00 (after 11:00 am ET). 

The Upshot

The Dow (DOW) fell by 0.5% to 32,813.23 and the Nasdaq (NDX) was 0.7% lower at 11,994.46 despite all of the indexes opening the session in the green. Financials (XLF) and health care were the biggest decliners, with energy the only sector to post gains. The US ten-year yield rose 6.5 basis points to 2.91%. West Texas Intermediate crude futures were up $0.04 to $114.71 a barrel.

Breadth favored decliners two-one, and there were 80 new highs vs 164 new lows. Big caps on the new high list included Enterprise Products Partners (EPD), Phillips 66 (PSX), Cenovus Energy (CVE), Canon (CAJ), and W.R. Berkley (WRB). Energy dominates again.

The ISM said the index climbed to 56.1 in May from 55.4 in April, compared with expectations for a decrease to 54.5 in a survey compiled by Bloomberg.

Although manufacturing is in decent shape from an activity point of view, the supply chain problem will take some time to fix, a Pantheon Macroeconomics research note said.

"Fears of a near-term rollover in the sector look overdone, though we think it likely that the ISM index will soften over the next few months, before recovering somewhat in the fall," Chief Economist Ian Shepherdson said, adding that while output is moving forward at a healthy pace, some industries, notably autos, have a long way to go before recovering fully.

In other economic news, the Bureau of Labor Statistics reported that job openings fell to 11.4 million in April from 11.855 million in March, while hiring fell to 6.586 million from 6.645 million, remaining well below the level of openings as the supply of available labor is tight.

Redbook reported that US same-store retail sales were up 12.6% year-over-year in the week ended May 28, faster than an 11.4% gain in the prior week due to a strong push from Memorial Day sales later in the week.

In company news, Salesforce (CRM) added nearly 10%, the top gainer on the S&P 500 and the Dow, after raising its guidance for the current financial year and beating estimates for the fiscal first quarter.

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