We usually get some very bad weakness in late February; this year took a few days longer. It has been a while since we have seen a failed bounce and a rush for the exits, but we sure had one kick in today. After bouncing three days in a row, we topped out just as the bulls were ready to celebrate another big gain on the first day of the new month. Apparently too many folks had been sucked in, hopeful that our correction was over, and they put pressure on the market all day as they scrambled to escape positions.
The good news is that we are still above last week's lows; the bad news is that according to the technicians it looks like a test of support is almost inevitable. We haven't yet really cracked the uptrend line that has been in place since September, but we are moving in that direction.
There isn't any big mystery about what is causing the pressure. Oil is close to $100 a barrel, and there is fear that it is going to stay up there for a while as the issues in the Middle East continue to develop. That's the official oil story; the real reason is some powerful folks are quite worried about big sources of oil, like Saudi Arabia, are tapped out, lying about their reserves for years.
The only sectors that finished in the green were gold and silver. There was a whole lot of ugly out there, particularly in some big-cap momentum favorites like GOOG, DECK and PCLN, which are not attracting any dip-buying interest.
At this point we are obviously going through a correction, and the issue is whether it is going to develop into a change of trend. Either way, the best approach is to just stay out of the way and let it play out.