If the S&P closes above 1650, we will retest yearly highs.
Equities suffered an extremely choppy day on Tuesday, as the rally in the Japanese yen caused late selling. I still feel that this a "buy the dip" market, but there are reasons to be cautious.
The S&P stalled on Tuesday against resistance at the 1639 to 1642 level, which coincidentally was a lower high in the session compared to the reopen overnight. With a rally that failed at 1639.75, many of the indexes touched the unchanged level before running out of gas. The breakdown late into the close didn't lead to a new low, but solid data out of Europe on Wednesday morning has helped keep the S&P in a range.
(Read More: Futures Climb After S&P 500 Slumps 1%)
The market is now back above the major momentum pivot of 1631 to 1633. MSCI cut Greece from developed nation to emerging market status, but the market has shrugged this off, and may still be concentrating on the positive news on the US credit status that came out Tuesday but failed to attract many headlines. The fact is that S&P upgrading the U.S. sovereign debt rating to "stable" from "negative" should be more positive for the market than many have made it out to be.