Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter.

The oversold bounce in equities that started on Friday carried over to Monday’s trading and continued in full force right into the close. Because of the current speed/volatility of the market, we must focus on close-up charts to get a better read of the situation.

The hourly chart of the S&P 500 shows that with yesterday’s rally the index has now come back to test the bear flag from which it fell out of last week from underneath. The stochastic indicator (not shown) is well into overbought territory and a slowing of the oversold bounce should be in order barring any bazookas from Europe.

Both in terms of the broader indices and in terms of the S&P 500 sectors, technology was one of the major laggards yesterday. Semiconductor stocks as measured by the Semiconductor HOLDRs (AMEX:SMH) closed up just 0.27%, while the Nasdaq 100 close up just 1.24%. Large-cap technology stocks have so far remained the last hiding spot for investors as stocks like Apple (NASDAQ:AAPL) and Amazon.com (NASDAQ:AMZN) have remained stable.

Sooner or later, however, should the broader market continue to slide, margin calls will lead fund managers to sell more winners, and those inevitably will include high-beta technology stocks. Bear markets spare no one, and the only “safe” spot will be cash.

On the charts, the Nasdaq 100, in similar fashion to the S&P 500, last week fell out of its bear flag pattern only to rally back into it today. But the bear flag pattern remains intact, and in addition to the aforementioned point about potential margin calls exuding pressure on high-beta stocks, the momentum oscillators also indicate lower levels on the chart.

Falling markets have a strong tendency to result in a severe increase in correlation within and across asset classes. The chart of the CBOE S&P 500 Implied Correlation Index (KCJ) shows the correlation among stocks in the S&P 500 recently hit a new high for 2011 and has been on a steady rise since late July.

From a cross asset perspective, the best example would of course be the metals and how they have come under pressure right in correlation with stocks. Within the asset class of stocks, just note that on up days most stocks end up being green, and on down days most stocks are down. That’s why in the current environment it is best to play the indices via their respective tracker ETFs, options or futures rather than individual stocks.

Given the broken weekly charts in equities and lackluster rally attempts, it is likely stocks will turn lower again soon. If and when they do, remember the current high correlation among stocks and play index ETFs instead.

• See Sam Collins’ Daily Market Outlook: How Long Before the Bulls Give Up?
• See Sam Collins’ Trade of the Day: Defense Stock About to Come Under Attack