Previously, we looked at the S&P 500 and said through year-end it looked as though the index would trade steady to higher. During Wednesday’s session, however, the market had a different idea and traded higher for less than 2 minutes (literally) before dropping over 20 handles to close near the day’s lows.

Yesterday’s decline resulted in a clean break of the Feb 11 trend-line we had been looking to as support during the ongoing range. The next level of near-term support could be put to the test today at the recent range lows of 2248 created on 12/14. If an immediate bounce doesn't unfold from that low, then we will watch how the market responds around minor support at the lower parallel (~2245) married to the top-side trend-line off the highs. The market could find a bid here soon after yesterday’s drop, but the fact the trend-line off the November low was broken last week and the February trend-line gave-way yesterday does add some hesitation. If we are to see downside follow-through, there is nothing substantial to the left on the charts, possibly bringing into focus the top-side trend-line off the November 2015 peak. It’s another 20 points lower, though, so with yesterday’s drop included it would be an aggressive move.

We’re reluctant to make much of yesterday’s decline as a directional bias is somewhat out the window at this juncture with a heightened risk for unpredictable swings in an illiquid, holiday trading environment. We’ll wait for the calendar to flip to see which way things want to unfold when full market participation returns. Still residing in the camp of higher before lower in early January, but making a wager on that right now doesn’t look very appealing from a risk/reward standpoint. We’ll stand aside until after the New Year festivities.

S&P 500: Daily