The S&P 500 pulled back a bit during the trading session on Wednesday as we continue to see the 4400 level as an important area. At this point, we are staying in a very tight range, waiting to see what happens next. A pullback at this point will more likely go looking towards the uptrend line underneath, which is also supported by the 50-day EMA. Both of those could offer a significant amount of support, so I think a lot of value hunters will be coming into the picture to pick up dips.
If we do break down below those levels, then it is likely that the market could go looking towards the 4200 level, an area that has been important more than once. If we were to break down below there, then it is likely that we could go looking towards the 4000 handle, an area that is a large, round, psychologically significant figure and where the 200-day EMA is coming into the picture. I imagine that there are probably a lot of options barriers in that area, which could cause a certain amount of interest. If we were to break down below that level, then I might be a buyer of puts in that general vicinity if we were to start breaking down. I would not be a straight seller of this market though, because the Federal Reserve is likely to do something to pick it back up if it starts to get too ugly.
To the upside, if we were to break above the 4420 level, then it is likely that the market could go looking towards the 4500 level. The 4500 level is an area that will attract a certain amount of attention, but as a general rule, this market tends to move in 200-point increments, so it is likely that we could continue to go much higher towards the 4600 level. I do think this market will go higher over the longer term, but the Thursday trading session could be very quiet as the market participants will start to focus on the jobs number coming out on Friday. Obviously, that will cause a lot of volatility and concern, but over the longer term it is likely that the uptrend will continue.
