The ramp higher in stock exchange traded funds Wednesday carried the S&P 500 to a key technical test as investors hope for a Santa Claus rally to end the year.

“The S&P 500 surged at the open following news of coordinated action from the major central banks. The positive news has carried the index slap bang into resistance from the 200-day exponential moving average (1,233), the top of the late summer range (1,231) and also falling channel resistance,” notes Tarquin Coe, technical analyst at Investors Intelligence. [S&P 500 ETFs Retake Key Averages]

The iShares S&P 500 (NYSEArca: IVV) was up 3.5% on Wednesday after the Federal Reserve threw a lifeline to European banks to help alleviate funding stress. The Fed is working with other central banks to lower the pricing on existing dollar liquidity swap arrangements. [Global Stock ETFs in Rally Mode on Central Bank Moves]

“With those levels tested this morning the final hours of the afternoon session will be critical. The S&P 500 must break or at least close on the upper end of that resistance cluster. Failure to do so would likely see a pull-back from the top of the multi-month range tomorrow,” Coe wrote in a newsletter Wednesday.

“The reasoning is that today’s good news would have largely been priced in and its hard to see what near-term trigger is left to enable the push through the cited resistance levels (which are formidable!),” the analyst said. “We remain bearish as the trend off the late October high still stands. However, we are prepared to adopt a more bullish view should today’s rally follow-through.” [Will Santa Claus Visit ETFs?]

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.