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Getting Technical: Will The Retest Hold?

875 is the critical level. That is where the S&P 500 rallied from in April, and that's where technicians say it will find support when the market turns lower.

For Brown Brothers Harriman's Andrew Burkly, this week's pull back created an opportunity to buy, and in fact, the retest may be over for now. "We were within five points or so (of 875). That's pretty close. I wouldn't be surprised to see us holding on that area," he said in a phone interview. The S&P was at about 894, up 10, as we spoke.

Burkly sees the S&P ultimately reaching 1,000. "I think we're in a four to six months rally, that when all is said and done, will peter out around the 1,000 level. You just need to be tactical and play in and out of these moves," he said.

He said the short and shallow pull backs are showing how resilient the current rally has been.

In a note today, he said: "In our view, this is the first real test of the cyclical advance, and how stocks act in coming days will be very telling in terms of how much conviction investors have in the "new bull market" thesis.

If this decline is like all the other short-lived dips of the past ten weeks, buyers should surface relatively soon. On the downside, we are using the lower band of the 20-day moving average envelope, currently at 850, as a trailing stop as it has been an effective tactic over the past eighteen months."

Jobless claims data was ugly today, showing a worrisome level of declines in payrolls. JP Morgan economists explained the increase to 637,000 in the week ending May 9, from the 602,000 in the prior week, could well be the result of auto industry layoffs. They note it was the same week that 27,000 hourly Chrysler workers were laid off, as well as an unknown number of workers at suppliers.

Since Chrysler layoffs are a one-time event, it's possible that initial jobless claims are in a downward trend, a positive for payrolls, they said.

Questions? Comments? marketinsider@cnbc.com

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