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What Technical Charts Are Saying About the S&P 500

NEW YORK ( TheStreet) -- Today's stock-market action has proven to be uneventful. The S&P 500 Index appears to be content holding the 1,385 level ahead of the Thanksgiving holiday. If the market can finish higher today, this will be the fourth consecutive increase since a swing low of 1,340.25 during Friday's session.

Although the market is now trading above the nine-period exponential moving average (EMA), a test of the 20-period EMA at 1,389 looks to be on tap. The market has "kissed" this level today prior to the pit session open. However, thus far it has not been able to mount a credible assault on this technically significant area. I certainly believe that light pre-holiday volume is driving price action today, with traders more focused on turkey and stuffing than fiscal cliffs or whatever happens to be going on in Greece today.

One must remember that following sell-offs of the type we have seen since Nov. 7, the market is vulnerable to extremely powerful short-covering rallies. I believe that is in large part what we have seen during the past four sessions, and I believe that more could be in store.

In addition, the market has so far held a key trend line on the weekly charts. This trendline comes into play on the December futures at the 1,360 area. So far, so good.

One must also consider the implications of the 200-day EMA. This comes in at the same level -- about 1,360. Although this level was violated last week, the market in my opinion did not spend enough time below this key level to convince me it was a "legitimate" violation.

As I have discussed in previous commentary, markets do not normally "knife" right through this area, and this time around has proven to be no different. I will be watching the 1,389 level very closely, and I do suspect we will see the market pierce it to the upside. Perhaps not today, but in the coming sessions.

Assuming this level is taken out, I will then look for a test of the 50-period EMA just over the 1,400 level. If this area is reached, I think it will be important to watch and see how the market reacts to it. If the market tests it but immediately gets fatigued, that could be indicative of the turning point and a potential reversal back to the downside could get under way.

On the other hand, if the market takes out this level in convincing fashion, then at that point I think the Santa Claus rally will truly be on and we will see a grind higher by markets into year's end.

The important thing to focus on here is simply the price action. Price action is the only pure indicator that there is. By paying very close attention to price action at key levels, one can potentially get a step ahead and position accordingly.