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Traders watching for signs on the Fed, China

Wall Street could be in for another rocky ride Wednesday as traders continue to eye China and await indications on the timing of a rate hike from Friday's jobs report.

"I think given the direction of the global (markets) and given the lack of clear commitment on part of the Fed (holding off) there's a significant possibility that we retest the lows of last week," said Krishna Memani, chief investment officer at Oppenheimer Funds.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, crept higher Tuesday to above 31.

Read MoreTuesday's market statistics roundup


Trader on the floor of the New York Stock Exchange.
Lucas Jackson | Reuters
Trader on the floor of the New York Stock Exchange.

The Dow Jones industrial average and S&P 500 both plunged nearly 3 percent Tuesday for their worst first trading day of September in 13 years. The Nasdaq composite lost 2.94 percent to join all the major U.S. averages in correction territory. The S&P closed down 2.96 percent at 1,913.85, dragged down by energy.

Analysts attributed some of the declines Tuesday to a sharp reversal in oil prices.

WTI crude oil snapped a strong three-day rally to settle down 7.7 percent at $45.41 a barrel. Crude extended losses in after-hours trade after a larger-than-expected increase in inventories reported by the American Petroleum Institute.

Read MoreIf the Dow tracked oil, it would be THIS bad

Traders will carefully watch weekly crude inventories from the U.S. Energy Information Administration out at 10:30 a.m., ET, Wednesday.

"Oil is a factor but the current machinations in the market are technical in that market itself than economic," Memani said.

"For now I'm singularly focused on the jobs report," he said.

Read MoreFed's Rosengren: Job target for hike 'largely' met

The ADP private sector employment report is scheduled to come out at 8:15 a.m. ET. The data are often viewed as an indicator on the nonfarm payrolls due Friday.

China will also be watched carefully. Global markets declined Tuesday after signs of weakness in the Chinese services industry increased fears that the sector would not be able to offset the greater slowdown in manufacturing.

Both the official and Caixin/Markit manufacturing PMI came in below the expansion/contraction line of 50 for August.

"It's decelerating faster than what was anticipated," said Clem Miller, investment analyst at Wilmington Trust Investment Advisors. But with a reading just below 50, China's economy is "far, far from the whole hard landing."

Read MoreHere's how China slowdown will hit your state's economy

For many analysts, however, the timing of a rate hike by the Federal Reserve is the key factor for U.S. stocks.

The Fed's Beige Book on regional economic activity is scheduled for release at 2 p.m. ET Wednesday. Other data expected include productivity and costs at 8:30 a.m. and factory orders at 10 a.m.

"If we hadn't seen this action in China the Fed would have September" intact as the liftoff date, said Ryan Larson, head of equity trading at RBC Global Asset Management (U.S.).

Read MoreChinese firms increase support for stock market

He is also watching Thursday's European Central Bank meeting for comments from President Mario Draghi on the China impact on the regional economy.

"The problem with that is in the U.S. we're leading up to a holiday weekend," Larson said. "Certainly fewer and fewer participants as the week moves on."

According to the Stock Trader's Almanac, "From 1950 through 1977 the three days before Labor Day pushed the DJIA higher in 25 of 28 years. Bullishness has since shifted to favor the two days after the holiday as opposed to the days before. DJIA has gained in 14 of the last 21 Tuesdays and 16 of the last 21 Wednesdays following Labor Day."

Read MoreVolatile market crosses into a 'different world'

To be sure, many analysts expect the turbulent swings to indicate more of a bottoming process than a renewed decline. As of Tuesday's close, the Dow and S&P were 2.5 percent above the closing low hit during the selloff last week.

"We had a very violent week last week," said David Kelly, chief global strategist at JPMorgan Asset Management. "As many people pulled out it's very typical for markets to experience aftershocks."

"We've seen what the limits on oil are. We've got a certain amount of stability in European (markets). I don't see a lot of reason for a big selloff right now," Kelly said.

Vera Bradley and Five Below are among the few names reporting earnings Wednesday.

Read MoreThese battered stocks are China-proof