Why S&P 2,000 will quickly be put to the test

The S&P 500 closed above 2,000 for the first time ever, but traders say it will quickly be put to the test once the usually volatile month of September gets underway next week.

"I think the next spot that's going to be psychological is what happens when the perceived big boys come back from vacation.... A lot of people who are short this market say: 'Wait for Labor Day when people come in and sell,' " said Scott Redler, partner at T3Live.com.

The S&P crossed 2,000 for the first time Monday on the lightest trading day of the year, and it closed just under it at 1,998. The S&P regained 2,000 Tuesday and closed a hair above it at 2,000.02.

Traders on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters
Traders on the floor of the New York Stock Exchange.

But technicians say the S&P has a good chance of holding on to 2,000 and gaining further, since the market recently overcame resistance at the 1,991 level. Redler also says there could also be buying pressure on fund managers who feel compelled to chase the market's recent gains, and that would force a short squeeze, pushing the market higher.

"These big round numbers, it's like a run to the finish line," said Paul LaRosa, chief market technician at Maxim Group. "Once you get past it, you feel exhausted and fall down.... I'm a little more cautious at big round numbers, but you've got resistance just below it. It's a better thing to have a footing below it. I'm a little more confident it's more likely to hold at these levels."

Strategists also said the market's changing leadership is helping. Redler points out that energy, which was beaten down this month, is leading the gains. The S&P energy sector was up 1.6 percent so far this week and was down 1.7 percent for the month, the second weakest sector.

Asset class performance since major market milestones (%)

Click to edit
Since 1000
Since 1500
Since 1900
Since 1909*
Last week
Years since 13.57 7.32 0.26 0.05 0.02
S&P 500 99.67 33.07 5.19 4.69 1.39
Cons. Discretionary 205.64 75.68 5.88 5.37 1.72
Cons. Staples 111.64 64.91 2.07 3.71 0.68
Energy 293.63 42.34 3.13 2.39 0.9
Financials 9.77 -37.74 5.9 5.25 2.16
Health Care 159.47 73.38 7.67 6 1.65
Industrials 117.52 35.2 1.43 5.4 1.15
Technology 134.71 76.24 9.1 5.18 1.58
Telecoms -18.93 -6.47 -0.39 1.44 0.49
Utilities 50.74 0.96 2.14 4.69 1.86
Materials 118.26 30.89 3.62 3.15 0.18
Dow Transports 151.45 63.97 5.84 5.77 0.56
Russell 2000 169.22 41.1 3.85 4.45 0.96
S&P 400 Midcap 329.33 61.12 4.52 4.85 1.35
Gold 321.97 86.63 -1.11 -2.56 -1.57
WTI Crude 445.69 47.32 -10.73 -4.3 -3.38
CRB Commodities 22.72 -7.46 -6.4 -1.56 0.11
Long Bond Future 15.65 26.22 2.72 1.01 0.36
US Dollar Index -17.72 0.67 2.62 1.19 1.13
Ten Year Yield ** -3.16 -2.28 -0.14 -0.02 0
Source: Bespoke *Most recent local market bottom 8/7/14 **Change, not % change

"S&P 2,000—I like it. Here's why I like it. There's been very good leadership on the way to new highs as an indication of risk appetite in the market. I like that the high-betas-to-low-volatility ratio also reached a new high," said Ari Wald, technical analyst at Oppenheimer Asset Management. "It's been good leadership, still a very healthy uptrend, and it's one we think can continue." Wald said select areas of the financial sector are participating more, and he also likes big cap technology stocks.

"Biotech is breaking out to the upside again, and now if you're looking for something that hasn't run up that much, I think energy could play a little bit of catch-up, specifically some of the equipment and services names," he said.

Analysts say that determining the market's course this year is difficult, as it had not been expected to return much after a more than 30 percent rally last year. The S&P 500 has outperformed so far and is above many strategists' year-end targets with an 8.3 percent year-to-date gain.

But Wald says odds are that the S&P will also perform well in September. Since 1950, September has been the second most volatile month and the worst performing, with an average loss of 0.47 percent.

Read MoreWhy S&P 2,000 milestone has Art Cashin unimpressed

"There is sometimes fear about September seasonality...the average performance of the S&P 500 when it's above its 200-day is 0.4 percent gain. If it's below its 200-day, it's a 2.7 percent loss.... Since we're in an established uptrend, we think those worries are overstated this year."

Wald said the S&P could reach 2,080 in the near term based on its recent moves.

LaRosa agrees with the 2,080 target, and he said he would feel more confident that the S&P would hold 2,000 if other indices return to their highs. The Dow needs to reach 17,151 and was trading a little over 30 points below that level Tuesday.

Read MoreSiegel: Why this bull has room to run

"I'm not going to get too excited until the Russell (2000) returns to its highs, and it's far away from that," he said adding the Russell has risen above the key 1,164 level and that could help it make a run for 1,213.

"If that happens I would expect the market to explode and all these stocks that are floundering should form bases and go higher. If that doesn't happen, you're back to square one. You're back to a very difficult slow moving market," he said.

Stocks have taken their cue this weak from European equities, lifted by the prospect of new easing by the European Central Bank. The ECB could set the tone for next week, as it holds a meeting on Sept. 4, and speculation has been swirling it will take some action.

—By CNBC's Patti Domm