Stocks staged impressive gains and closed near session highs on Monday as trade fizzled. All five major indices posted gains of three percent or more with small-cap stocks leading the charge. The small-cap Russell 2000 closed up a whopping 4.4%. The tech rich Nasdaq added 3.5% while the S&P MidCap 400 and the S&P 500 both improved by 3.4%. The Dow Jones Industrial Average tacked on 3.0%.

Market internals were mixed for the fourth consecutive day and must be strongly considered when interpreting the day's positive price action. Volume plummeted on both exchanges by a massive 24.0% but advancing volume overwhelmed declining volume by 16.7 to 1 on the NYSE and 7.0 to 1 on the Nasdaq. The anemic volume speaks clearly to the absence of institutional participation in Monday's rally. Since the reversal day last Tuesday the market has still not posted a follow through accumulation day. For the moment it appears as if the current rally may be nothing more than a house of cards.

Over the past two weeks the Nasdaq 100 Index ($NDX.X) has shown relative strength to the broad market but is now approaching major resistance at its 200-day MA. An overcut of and reversal back below this key mark could provide an early signal that the current rally is reaching exhaustion. We will be monitoring the Nasdaq 100 closely for signs of a reversal.

Over the past five sessions the ProShares UltraShort FTSE China 25 ETF (FXP) has been selling off and has now pulled back into support near its 20-day and 50-day moving averages. We are now awaiting the formation of a reversal candle to provide a possible long entry signal for this ETF.

Five days of rallying on light volume is far from what the market needs to reverse the current bear market trend. Without institutional participation it's unlikely that this advance can hold up much longer. Light volume rallies are indicative of bear market bounces.

Deron Wagner is the Founder and Head Trader of both Morpheus Capital LP, a U.S. hedge fund, and MorpheusTrading.com, a trader education firm.