The technical setup for a higher S&P looks good. Equities continued to trade higher, with the S&P closing above the 1,349 to 1,351 resistance in the June contract, but just below the 1,355 breakout level. We will now be using the September contract, which trades roughly 6 points lower than the June contract, and traded up to 1,648.75.
Wednesday's high is 1,649, as this aligns with the 1,655 line in the sand from the June contract. The market will likely stay quiet into the 2 p.m. EDT Federal Open Market Committee statement, and Bernanke's 2:30 p.m. news conference.
(Read More: Fed Likely to Keep Options Open on Bond Buying)
Look for the market to remain in check around the 1,646 retracement level, and use early profit-taking to take a new low against 1,641 as a buying opportunity, with the expectation that the market will trade back into the 1,646 area ahead of the Fed.
A late move above 1,649 will likely cause a melt-up into the close after the Fed, and a retest to the highs within the next session or two. Only a close back below major support at 1,635.50 will show signs of a failure. This June 1,631 level is now at 1,625 in September, and on a closing basis, this will be the line in the sand that leads longs to jump ship.