A continued rally in the equity markets is really dependent on continued leadership in Technology, as well as a recovery in Small-Caps.
The following Weekly comparison chart of the Dow 30, S&P 500, Nasdaq 100 and Russell 2000 Indices shows that, from the 2009 lows, Technology has led the overall rally, for the most part, and, particularly, since early this year when the spread has widened considerably between the NDX and the others.
The following 60-day 60-minute comparison chart of these 4 Indices shows the NDX approaching this year's high, while the RUT has the furthest to go to reach that point. I'd watch for any build in volumes in the NDX and the RUT on, either a rally, or any decline from this point...to confirm a commitment in sentiment, one way or the other.
The declining momentum indicator on the following 60-day 60-minute ratio chart of SPX:VIX is not confirming this latest rally in the SPX from August 11th.
Any low-volume push higher in the NDX and RUT, combined with weakness in the SPX may indicate a loss of appetite for equities in the near-term. Price on this ratio chart has pushed above the near-term resistance level of 150.00 (mentioned in my post of August 11th). Failure to hold this level will likely see Monday's gap-up filled. A break and hold below the 110.00 level may see a much larger-scale correction in equities begin...hence, the importance of volume commitment, either way, in the NDX and RUT.
Each candle on the SPX:VIX ratio chart below represents one year. I last wrote about this ratio pair on July 31st.
You can see at a glance that price action has been extremely volatile, so far, this year and has nearly re-tested the lows of last year's candle. The Momentum indicator remains elevated at an all-time extreme on this timeframe.
At the very least, bulls will have to push the price above the 150.00 level and hold it there to coax investors into putting their money in equities in the near-term...otherwise, we'll continue to see volatile intraday swings, or even a much bigger correction in equities if price falls and holds below the 110.00 level.
UPDATE: Monday August 11 @ 1:11 pm EDT ~ As shown on the 60-day 60-minute chart below of SPX:VIX, today's intraday rally is in the process of filling the gap down from July 31st. However, it has left a gap up from today's open. All prior gaps have eventually been filled on this timeframe, so I'd presume today's will be filled at some point, as well...so the 120.00-110.00 level will need to hold as major support if any serious rally could resume after any gap-fill.
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