Volume is anemic, but ultimately price is the final arbiter. A 0.7-percent rally from Tuesday’s close will have filled a February 24th gap, which is likely to happen in the sessions ahead. After that, bulls will be eyeing the February 19th high on the S&P 500.

The vow-volume creep higher continues. 

Bulls seem determined to fill the February 24th gap-down on the S&P 500 large-cap index (3306.51). A 0.7-percent rally from Tuesday’s close will accomplish that. After this, they obviously will be eyeing the February 19th all-time high of 3393.52, which is 2.6 percent away (Chart 1). 

If things pan out this way, this will have come after yet another failure on the part of bears to cash in on opportunity. Both Thursday and Friday last week, they had a shot at reclaiming the 20-day moving average, but bulls once again denied them of that luxury. 

Previously, in late June, bears had an opportunity to take out the 200-day but came up short. Bulls, on their part, both Monday and Tuesday this week defended short-term support at 3280s. In both sessions this week, the index rallied along the underside of a broken trend line from the March low.

Ordinarily, this could have been a major trend break, but, once again, this is an instance of bears not being able to fully take advantage of opportunities that came their way. Hence, growing odds that the gap gets filled – at least – in the sessions ahead. How volatility behaves by then has the potential to dictate things then.

VIX closed under the 200-day 13 sessions ago. Volatility bulls can take solace in the fact that the index has not fallen apart even after breaching the average. At the same time, rally attempts have been consistently rejected, including last Thursday when intraday VIX managed to rally past the average but was denied at the 50-day, for a gravestone doji session (Chart 2). The 50-day is slightly dropping, while the 200-day is slightly rising.

Interestingly, VIX is no longer bound by a falling trend line from March 18 when it peaked at 85.47 intraday. It is not because of a breakout, rather because since the trend line was dropping, the point at which a breakout occurs continuously drops. In other words, time took care of it. This is probably why the index (23.76) is struggling to reclaim the averages, not to mention other levels of support-turned-resistance – 30-31 and 36-37 being the important ones.

As things stand, equity bulls are hoping for a downside surprise. Support at mid-20s is holding, although both Monday and Tuesday 22.17 got tagged intraday, right at the aforementioned trend line. A breach of this zone likely hastens a move toward 20. This is when odds grow the S&P 500 charges at the February high.