After the most dramatic reversal in 14 months, stocks could face another next big test Thursday.
"The real test is whether the market will fall below and close below the 50-day moving average, which it hasn't done since Election Day. That would be a signal the complexion has changed, and that would breed more caution," said Scott Redler, partner with T3Live.com.
The 50-day moving average for the S&P 500 is 2,344. It is viewed as a support level, based on the average closing price over the last 50 sessions. Breaking beneath that level could be viewed as a negative for stock prices.
The S&P 500, after rallying above 2,370, a key resistance level, reversed course sharply Wednesday and closed down 7 at 2,352.
Stocks rallied early in the day, but sold off in the afternoon, after the Fed spooked the market with comments on equities being highly priced. Shortly after the Fed released its 2 p.m. minutes, House Speaker Paul Ryan was quoted as saying that tax reform could take longer than the overhaul of health care. Ironically, the Fed had noted that the market may have been boosted by expectations for corporate tax reform.
Art Cashin, director of floor operations at UBS, said the release of the minutes from the Fed's last meeting was a turning point for stocks, which he said also obsessed over Fed comments that it could begin to wind down its balance sheet this year. That is a move that bond strategists say could push interest rates higher.
Redler, who follows the market's short-term technicals, said the dramatic reversal in the S&P 500 Wednesday may be a forewarning of more turbulence to come.
"When you break key levels and hold them, it's a constructive signal for the bulls. If you push above levels and it fails, it could give you some clues that there's more weakness to come. The banks and small caps were giving clues even before the Fed said the market is quite high," said Redler.
Redler said the push above 2,365/2,370 drew in traders who were confident the market gains would hold, and it also flushed out shorts. But the reversal trapped the investors with new positions, and the selling became more powerful as they bailed out.
"Today was your day to take notice," Redler said.
Watch: Tax worries, Fed spook stocks