Equities rebounded solidly on Wednesday but the impact of the rally was lessened by light trade. All of the major indices closed higher led by a 2.7% gain in the small-cap Russell 2000. The S&P MidCap 400 closed higher by 2.2% while the S&P 500 added 1.6%. The Dow Jones Industrial Average tacked on 1.5% while the Nasdaq was the day's laggard as it posted a 1.3% gain.

Internals were mixed on Wednesday as volume plunged by 16.3% on the Nasdaq and a massive 29.2% on the NYSE. Still, advancing volume topped declining by 8.9 to 1 on the NYSE and 2.0 to 1 on the Nasdaq. All in all, it was an unimpressive rally due to the light volume. Light volume is a clear sign that institutions were not participating in the day's action. This serves to cast doubt on the breadth and strength of the rally.

The Pharamceutical Holders ETF (PPH) has recently pulled back and held support of both its 200 and 20-day moving averages. During the recent bear market move PPH demonstrated very good relative strength and appears ready for a move higher. A move back above the two-day high of $68.28 could provide a long entry trigger for this ETF. We are placing PPH on the watchlist. Trade details are available to our clients in the watchlist segment of the newsletter.

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The S&P Select Sector Technology SPDR ETF (XLK) has pulled back and held support of its 20-day EMA and 200-day MA. A volume-fueled move back above yesterday's high of $25.72 could provide a buying opportunity in this ETF.

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The market appears staged for a move higher. In the face of very negative news it has been holding support and now appears ready to "climb the wall of worry" to higher ground.

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.