What's with 1350 on the S&P 500

Note that for Friday of last week, Monday of this week and Tuesday, the S&P has crashed through the 1350 level only to keep rebounding back up through this level. I have watched it trade throughout the entire session and have noticed that it keeps getting sizeable bids coming in to take it back up but once that buying dissipates, the sellers come back in and use the rally to pound it lower. Then back up it goes. It appears that someone of large size is attempting to defend this level.

I remember writing back in February how stubborn this level was on the way UP and how it could not seem to clear it on a strong closing basis. Once it pushed through it of course triggered a large amount of short covering and went on to make new yearly highs.

What has transpired since then is that sovereign debt woes out of Europe, combined with deteriorating economic data out of the US and some slowing in growth out of China, has traders moving away from the so-called "Growth Assets" or Risk trades and into the Dollar and US Treasuries.

That flight of money out of equities has taken the S&P back down to 1350, which is now serving as a support level on the technical price chart. This level also happens to closely correspond with the 100 day moving average, which is still rising, unlike the 50 day which has now decidedly turned down. It also is quite close to the solid red horizontal support line noted.

My own opinion, and I cannot prove this, is that the ESF is in the market attempting to prevent this swoon in the market from becoming something more sinister. There looks to be some light support below this level near 1330 which if that gives way, should see the index drop below 1300 and down towards 1285 or so. Chartists will therefore see this 1350 level as quite a key to where things are going next.

If it goes, fasten your seat belts. Then again, it might be just the thing to send the Doves at the Fed scurrying to the microphones with hints of more QE, sooner rather than later.