While not quite snapping defeat from the jaws of victory, major averages failed to sustain Monday's early, robust gains. In the process, they closed below some levels deemed technically significant.

Buoyed by positive war news, shares jumped sharply higher early Monday, putting the

Dow Jones Industrial Average

and

S&P 500

on track to eclipse their respective simple 200-day moving averages of around 8370 and 884. As

reported earlier, some traders saw the surmounting of those averages as a reason to book profits, even as others viewed it as "confirmation" of the rally's staying power.

Monday's advance certainly lacked staying power. After trading as high as 8520.21, the Dow faded late in the day to close up 0.3% to 8300.41. Following similar patterns, the S&P closed up 0.1% to 880.15 after having traded as high as 904.89 while the

Nasdaq Composite

rose 0.4% to 1389.51 vs. its intraday best of 1430.10.

Even at the session's peak, market volume wasn't huge nor breadth wildly positive. At day's end, advancers bested decliners by 19 to 12 in

New York Stock Exchange

activity, where 1.45 billion shares changed hands.

One fundamental rationale for the stock market's failure to sustain its early gains was the midday reversal in crude prices. After trading as low as $27.15 early on, crude futures rose back above $28 after OPEC announced it will meet on April 24 to discuss possible production cuts. Still, crude closed down 2.3% to $27.96.

Coincidentally, or not, the Dow reversed after nearly reaching its March 21 intraday high of 8522.18 while the S&P similarly failed to sustain a move above its March high of 895.89. Similarly,

Microsoft

(MSFT) - Get Report

failed to eclipse its March high of $26.90, ending up 1.1% to $25.37 after trading as high as $26.43.

Some traders observed the S&P also faltered as it approached its exponential 200-day moving average of around 907. (Unlike the "simple" average price for a given period, the exponential average gives more weight to recent prices.)

The session signified to many that the early gains marked an end to the war-related rally, rather than the start of a new rally phase.

"A large majority on Wall Street have been looking for better times ahead once the war ended -- yet here we are seemingly on the verge of total victory and all the market can do is get back to the levels that existed on the eve of the war," commented Dave Hunter, chief market strategist at NYSE floor brokerage Kelly & Christensen. "Seems to me we are seeing the classic case of 'buy the rumor sell the news.'"

Clearly, there was plenty of war news for traders to sell. In addition to reports of allied forces occupying wide swaths of Baghdad, traders initially cheered the apparent death of Ali Hassan al-Majid, aka "Chemical Ali," Saddam Hussein's cousin and commander of Iraqi forces in the south; reports of more cooperation from Iraqi civilians; and, most crucially, the apparent discovery of Iraqi chemical weapons. The latter will boost President Bush's rationale for going to war, potentially silencing (or at least mollifying) many of his doubters.

The stock market's inability to parlay that news flow into a sustained advance convinced Steve Hochberg, chief market analyst at Elliott Wave International in Atlanta, that the "countertrend rally" from the March 12 lows has all but ended.

In Elliott Wave parlance, the S&P completed an "ABC rally," with the rise from the March 12 low to the March 21 high being wave A, the decline from March 21 to March 31 being wave B, and the rally from the March 31 to Monday's intraday high being wave C.

The S&P approaching 905 also satisfied a price target Elliott Wave projected, Hochberg said. "The one variable that has yet to be satisfied is time. Our work ... suggests that April 11-16 holds a strong likelihood of marking a turn, which we think will be a high."

Given that, he believes shares likely will "hold up" for another week or so. "Regardless, our work suggests the advance is closer to its end than beginning or middle."

New Bull or Same Old B.S.?

Of course, there's a bullish spin on all this. Namely, that the stock market's inability to sustain its early rally and the aforementioned technical hurdles will encourage the skeptics and keep optimism restrained, thus paving the way for continued gains. That's certainly a possibility, and many casual observers will look at Monday's final tallies and think the session was a bore, or maybe just a mild positive (which it ultimately was).

Two main factors generate skepticism about such a bullish scenario.

One, many market prognosticators remain eager to declare a "new bull market" has arrived, as was endlessly reported in various financial news outlets.

Second, the fundamentals don't support much more of an advance.

"Data released in the past two weeks continue to point to downside risks to the global economy," observed Goldman Sachs' global economics group. "Financial markets have effectively ignored the latest batch of negative news, suggesting that a deterioration of economic confidence while the war is underway has been widely discounted. Hard figures are now needed for the price action to break in a clear direction."

In other words, it's put up or shut up time. Problem is, there's little concrete evidence that ending the war will spur anything more than a short-term blip in economic activity. Furthermore, robust earnings growth -- resulting from presumed economic activity -- is already baked into shares.

Alcoa

(AA) - Get Report

, the first Dow component to post quarterly earnings, reported better-than-expected first-quarter results late Friday, and its shares rose 7.9%. Still, Alcoa's earnings were down more than 30% from year-ago levels, and last week's spate of warnings has some concerned.

The ratio of first-quarter negative preannouncements to positive ones is 2.9 to 1, according to Chuck Hill, director of research at Thomson Financial/First Call. That's the highest level since 2001's third quarter, according to Credit Lyonnais. (After Monday's close,

RF Micro Devices

(RFMD)

became the latest firm to warn.)

At the onset of first-quarter reporting season, Hill recommends investors focus on second-quarter preannouncements and second- and third-quarter earnings estimates. The latter are currently "very ambitious," he said, suggesting "the ultimate issue is what happens to

third-quarter earnings."

Somewhat alarmingly, Hill noted consensus expectations are for a "surge in year-over-year earnings growth," particularly in areas sensitive to business capital spending, namely technology, industrials and materials. For tech, estimates are for year-over-year earnings growth of 22% in the second quarter and 54% in the third. For industrials, comparable levels are minus 9% and 7%; for materials 2% and 25%.

"These growth rate surges are clearly not coming from easier comparisons to year-ago periods," Hill wrote. "Given the improvement underway last year, the comparison to the year-ago quarter is at least a little more difficult" in the third quarter vs. the second.

Yes (Virginia), there really are people betting on a "second-half recovery" story again. Still.

Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

Aaron L. Task.