By John Kosar on December 22, 2014

On Wednesday, the stock market reacted to Federal Reserve Chair Janet Yellen’s post-FOMC meeting press conference with a strong one-day rally that led into the S&P 500’s biggest two-day percentage gain since November 2011.

After reading the Fed’s policy statement and watching the press conference, which included multiple attempts by Yellen to explain that nothing had materially changed from previous communications, my conclusion is that the market was intent on getting its Santa Claus Rally almost regardless of what was said. And it did, with bells on.

Last week’s rebound was atypically led by small-cap stocks as the Russell 2000 gained 3.8%, putting it back into positive territory for the year. On the surface this is good news for the market since small caps, which usually lead the market, have underperformed all year. The not-so-good news is that technology stocks, the other market leader, which have driven this year’s advance, underperformed. The Nasdaq 100 gained just 2% for the week.

If last week’s rebound is the beginning of the stock market’s next leg higher, technology must resume its leadership role — and quickly. Without that, the sustainability of the rebound is suspect.

Watch This Market Bellwether for Clues

In a week like this one, when we’re trying to determine whether an historically huge two-day rally is sustainable, it is often useful to keep a close eye on market bellwethers like General Electric (NYSE: GE ). This blue chip — which is one the largest U.S. stocks, according to market capitalization, and is positively correlated to the S&P 500 — began this week situated right on top of its 2009 major uptrend line at $24.35.

Per the correlation, if last week’s post-Fed meeting rally is indeed the beginning of a new sustainable leg higher, then we should see GE hold $24.35 support and begin an aggressive move higher from it. Moreover, its current position just above a major trend proxy defines this as a low-risk buying opportunity for investors to participate in a well-defined, almost six-year bullish trend.

Conversely, a breakdown below $24.35 in this multinational conglomerate would carry negative implications for the entire market and would warn that a significant correction is emerging.

The Market is Still a Little Nervous

Market volatility is another metric I’m closely watching this week to help determine if last week’s rebound is sustainable.

The CBOE Volatility Index, better known as the VIX or the fear gauge, finished last week just above its 50-day moving average at 16.11. During the past several years, a rise above its 50-day moving average, indicating fear or apprehension by investors, has coincided with declines in the S&P 500, most recently in mid-September to mid-October.

It would take a sustained decline below 16.11 this week to indicate that investors have collectively become complacent enough to facilitate upside follow through on last week’s market rebound.

Utilities Hit Upside Target

In the Oct. 27 Market Outlook . I identified the Utilities Select Sector SPDR ETF (NYSE: XLU ) as a conservative way to participate in the market heading into year end, placing my target at $47. This was met at the end of last week, capturing a 5.6% rise in the ETF in about seven weeks.

Those who have not yet taken profits should consider doing so now. My work continues to suggest that long-term U.S. interest rates are in the process of establishing a significant bottom. Since utility stocks and U.S. Treasuries compete for yield-seeking investor assets, when relatively safer Treasuries begin paying a higher yield, they attract assets away from utilities.

As impressive as last week’s rebound was, I’m not convinced that it wasn’t an overreaction to the Fed statement and Yellen’s subsequent press conference. Strength from major support at $24.35 in market bellwether General Electric amid a sustained decline below 16 in the VIX would be necessary to help convince me.

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