It's not often that bears feel enlivened after a 2.6% rise in the

Nasdaq Composite

and a 4.1% gain by the Philadelphia Stock Exchange Semiconductor Index, but that is precisely the case after Monday's session.

Despite gains for all major averages, skeptics were cheering at day's end because the closing gains were far below the early highs. Major averages spent much of the morning struggling to build up a sharp initial spike and much of the afternoon floundering toward lower levels.

"I don't think a bull could be pleased with the results at the end of the day relative to where we were several hours ago," said Rick Bensignor, chief technical strategist at Morgan Stanley. "Yes, the market is up, but I'm not impressed by what the market did today. This should have been the day the bulls took over, and they have not."

Bensignor, who made a well-timed bottom call on

Oct. 9, said his scenario of a rising market would not change unless the

S&P 500

fell under 830, the

Dow

fell below 7800 and the Comp breached 1200.

"There's plenty of room to pull back and still have a chance to trade higher in the next few months

but there is vulnerability now," he said. "Today is, in my eyes, a technical failure, at least short term. Most people have green screens, but I'm unimpressed."

The onus is now on the bulls to prove that today's action was merely a pause in the market's rising trend, rather than a sign of its end, as bears contend. The naysayers, meanwhile, must avoid becoming cocksure that the rally has peaked, for the momentum it has generated remains intact, as does many fund managers' fear of missing the rally.

Up, but Not Outstanding

The Dow Jones Industrial Average closed up 0.6% to 8521.60 after trading as high as 8730.64 early on, while the S&P 500 finished higher by 0.8% to 908.35 vs. its intraday apex of 924.58. The Comp closed up 2.6% to 1396.50 but well off its early high of 1420.

Meanwhile, the price of the benchmark 10-year Treasury note fell 10/32 to 102 21/32, its yield rising to 4.04%.

The session was best embodied by

Microsoft

(MSFT) - Get Report

, which rose 5.8% to $56.10 but failed to sustain -- much less exceed -- its early best of $57.25. Microsoft was by far the leading positive influence on the Dow, after it received a favorable ruling in its antitrust case with the government late Friday.

It's unclear what, if any, fundamental developments caused the market's rally to lose steam, although some traders cited news that U.S. military reservists are being called up. Wall Street has mainly been embracing the potential for war with Iraq, looking forward to a redux of the 1990 experience. Perhaps this was a matter of fund managers buying the rumor of war and selling on the news its start may be approaching.

Another, more compelling, alternative, is technical in nature.

Brad Sullivan, head of floor trading and chief commentator at

TeachTrade.com

and one of the largest independent traders at the Chicago Mercantile Exchange, observed both the S&P (cash) and Dow Industrials failed to sustain intraday moves beyond their September highs of 923.98 and 8726.90, respectively. (Also,

RealMoney Pro

contributor Brian Gilmartin noted the S&P peaked today within a point of its October 1998 low of 923.32.)

Similarly, the Comp failed to surmount its August high of 1426, which appeared doable at midday, as

reported earlier. Also, the

Nasdaq 100 Unit Trust

(QQQ) - Get Report

failed to maintain the momentum above its August high of $26.21, closing up 2.6% to $25.90 after trading as high as $26.82 early on.

Outside of tech, the Philadelphia Stock Exchange/KBW Bank Index also faltered after coming within earshot of its August high of 806.90, closing down 0.2% to 777.38 after trading as high as 797.31.

Any of those indices, particularly the Comp, closing above their August or September highs would have provided strong technical confirmation of the rally being more than just a "dead-cat bounce" from the October lows. Such a development, which may still occur in the coming days, would have compelled buying by many technically inclined traders reticent to participate in the rally.

"It's disappointing in a small way in that during most of this move the market has been able to hold intraday moves and today was unable," Sullivan said. "As it became a little more apparent there wasn't enough steam

to sustain early gains you saw some daytrading selling in the final hour when volume did pick up."

At 1.6 billion shares, volume on the Big Board was 14% above the three-month daily average, according to Bloomberg. The 2.1 billion shares in Nasdaq trading was certainly above recent levels. However, Sullivan observed futures volume was about 20% below last week's daily average, suggesting today was a "daytrader type market

with a lot of people on the sidelines" ahead of Tuesday's high-stakes

midterm elections and Wednesday's

Federal Reserve

meeting.

Fundamentals Schmundamentals

There's another rationale for today's action: Namely, fundamentals don't support the recent gains, particularly the runaway advance for many telecom and chip-related names.

Salomon Smith Barney chip analyst Glen Yeung became the latest analyst to warn the recent rally has become overextended, only to see shares rally again. Yeung today reduced his sector weighting on chip-equipment makers to market weight from overweight, but the SOX gained 4.1% to 326.02.

Still, that was down from its early high of 337.65, and several names in the group also closed off their intraday highs, including

Applied Materials

(AMAT) - Get Report

,

Novellus Systems

(NVLS)

and

KLA-Tencor

(KLAC) - Get Report

.

Similarly, the Nasdaq Telecom Index closed up 4.6% to 114.27 but down from its early best of 116.57 while names such as

Ciena

(CIEN) - Get Report

and

Tellabs

(TLAB)

surrendered early gains and closed in arrears.

Finally, expectations for easing by the Fed on Wednesday have fueled the recent advance despite the questionable economic impact of another rate cut. The fed funds rate has been at a 40-year low for nearly a year now, and

last week's economic data weren't terribly robust. On Monday the government reported that U.S. factory orders fell 2.3% in September.

"Investors have again begun to treat bad news as good news with the thought that the bad news will encourage the Fed to ease more aggressively, and that such easing will be good for the stock market," observed Richard Bernstein, chief U.S. strategist at Merrill Lynch. "Although liquidity rallies can be strong, we continue to believe that the 'Greenspan put' ultimately will be discredited."

Perhaps what's more surprising is that this belief that Fed easings serve as what Bernstein dubbed a "protective put for the stock market" hasn't

already

been discredited.

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.