Everyone’s been waiting for a market bounce after the massive sell-off in the last few days, but the Standard & Poor's 500 needs to hit a certain level or stocks may test lower levels, said Steve Grasso, director of institutional sales at Stuart Frankel and a CNBC market analyst.
Grasso’s magic number is 1168 on the S&P 500 .
“Failure to reach that means we’re still in a downward trend, which means we’re going to test lower levels,” Grasso told CNBC Tuesday.
Meanwhile, investors are focusing on what the Federal Open Market Committee will say this afternoon. Economists are speculating the Fed could reaffirm that it will hold rates where they are for an extended period of time and also keep its balance sheet at nearly $3 trillion for a long time.
Investors are also closely watching to see if the Fed will embark on another quantitative easing program anytime soon.
“People are clamoring for [Fed Chairman Ben Bernanke] to do nothing,” said Grasso. “They want to see the markets really act on itself. We’ve seen him do a lot and we’ve seen those gains erase in the marketplace.”
Stocks have given up most of the gains since the Fed’s second round of quantitative easing known as QE2.
Meanwhile, gold prices continued to hit record highs in its biggest three-day rallyas investors rushed into the precious metal as a safe-haven play.
“If you’re a gold bug, you have to be pretty optimistic where gold leaves us at year end,” said Grasso, adding that the commodity is likely to finish near $2,000 an ounce by the end of 2011.
Expect "a lot of whips along the way, but higher is the trend,” he said.
CNBC Data Pages:
Top Dow Gainers:
No immediate information was available for Grasso or his firm.