Monday’s sharp rally appears to be a strong vote of confidence to the European Union’s plan to remedy its credit crisis.

We’re waiting to see if the enthusiasm will stick, as true trends to news reactions aren’t always clear the first day.

The major indexes closed up just under the critical resistance levels of their 50-day moving averages, which until successfully conquered, will likely hold our Sell Bias in check.

Volume for Monday was strong, but not in comparison to the previous two trading days that illustrated a massive exit of institutional-grade money from the market.

Beginning Thursday we’ll be on the lookout for a Follow Through Day on at least one of the major indexes, where a rally of about 2% of or so on volume greater than the previous day would suggest institutions are stepping up to support the Bull.

We wait a few days to allow short sellers time to cover their shares so as not to confuse it with real buying.

A lack of breakouts from top names in the market Monday could also be reason for caution. Until we see that type of Leadership resume we’re going to be suspicious of any chances of a sustained rally from here.

Looking at the largest stocks in the market, nearly every member of the S&P 100 shot higher – but hardly any new highs to speak of.

Consumer Staples type stocks, like Altria (MO) and Pepsi (PEP), show good potential to achieve highs soon. Success from this group would indicate funds may be more interested in bidding up less risky, defensive type investments.

Our course of action over the next few sessions is to simply watch what happens.

Jumping when the odds aren’t there is simply not out thing.