The market was set up for some sort of oversold bounce, but the one we saw wasn't all that convincing. After the gap up this morning, the market was unable to gain further traction and traded in a fairly tight range the rest of the day. The bears made one push in the early afternoon that failed, and then he bulls once again managed some late buying to close the market on a positive note. Buying in the closing hour isn't something you normally expected to see when the market is in a downtrend, but it has been a consistent theme of late. It is a good thing, too, because those end-of-the-day moves have helped prevent much uglier action.
Oil was the leader today as the focus shifted back to the Middle East. Japan is obviously going to be an ongoing issue, but emotions calmed down today. Talk that the Fed would soon allow dividend payments boosted the banks, and that helped us a bit later in the day also. Breadth was quite good today (2-to-1 positive) and all major sectors were in the green. But this was not the most energetic bounce, especially when you consider how oversold the market was to start with.
We are in a downtrending market now, and that means all bounces are suspect. But keep in mind that the biggest and strongest bounces generally occur in downtrends. Market players just aren't as well prepared for them and, as a result, bears are squeezed and underinvested bulls scramble. Once the buyers are sucked back in, that is when the most painful reversals tend to occur. Bad markets will wear out investors rather than scare them out, and the way it does that is by producing a failed bounce just when you start to think things are looking better.