Investors are closely watching as the S & P 500 nears a make-or-break level. After a strong start to the year, the broad index gave up some gains during a tough third quarter. The S & P 500 lost 3.7% during the July-September period, snapping a three-quarter winning streak. It has added to those losses in early October, sliding more than 1%. Those declines put it within striking distance of the key 4,200 level, which has investors on edge for a few technical reasons. "The S & P is at a confluence of support," said John Kolovos, chief technical strategist at Macro Risk Advisors. "It's a defining moment for the index." The 4,200 level is around the index's 200-day moving average, which traders care about because a move below it can signal the index is in a downward trend. It would mark the first test of the moving average since March, according to Jonathan Krinsky, chief market technician at BTIG. "It's likely that SPX cash tests its 200 DMA (4202) for the first time since March," Krinsky said in a note to clients. "The ~4200 level is quite significant for a number of reasons including the 200 DMA, the range breakout in May, and the 38.2% retracement of the October '22 lows to July '23 highs (4181)." Kolovos also said he's watching the 4,145 breakout level due to the retracement mark it represents. Highs from last February, May and November could also be worth watching, he said, because old resistance levels can later turn into points of support. What happens next? Kolovos said a pullback starting in July was expected, with many anticipating it would be a benign retreat that would bring the index near its 200-day average. He added that this type of pullback had been more normalized before 1987, but now investors have come to expect serious shocks. After what Kolovos has seen out of the market so far, he expects the S & P 500 to end the year around 4,600. That would imply the index can rise approximately 8% from where it finished Wednesday. Ending 2023 at that level would amount to gain of nearly 20%. Still, that would be below his forecast of 4,800 from earlier in the year. That level is near a record set in early 2022. He said that all-time high could still be hit, but it may come further into the future. But, if the market builds value underneath the 4,145 level, the index could fall to 3,800, Kolovos said. And with a return to a full bear-market mindset, investors could push the index below 3,500. The average market strategist expects the index to finish the year at 4,392, according to CNBC data. That's 3% higher than where the index closed Wednesday's session. Krinsky said that Wednesday's advance of about 0.8% alleviated oversold conditions in the short-term. But he said it did not change his outlook that the index will still test the 4,200 level and could move below it. "Markets are rarely that easy," he told clients Thursday. Meanwhile, he said the West Texas Intermediate crude prices falling in the session created a good opportunity to add exposure to energy names. He pointed to Transocean as a single stock that looks attractive on a technical basis. — CNBC's Michael Bloom said contributed to this report
