The bulls and bears have been battling back and forth all week, with neither side able to gain much traction. This afternoon the steady rise in oil finally become too great to ignore and it triggered a bout of selling. We bounced back a little in the final minutes, but we ended up closing near the low-point of the week.
What has been most notable about the action for the last couple weeks is that we are acting poorly intraday. We have some gap to the upside to the start the day but every one of them has fizzled lately. We have not had a gap-and-go day in a while.
On the other hand, we haven't been breaking down either. The bears had their best success this afternoon, but previously we always found some support before the selling accelerated at all. I suspect that worries about oil pushed some folks to cut long exposure over the weekend. We are going to be seeing $4 gas prices and that is going to have a psychological impact.
Momentum in the market has been slowing for two weeks and we have the potential for a rollover-type pattern to kick in. This is a situation where further growth has been limited and the selling starts to accelerate as the recent buyers grow impatient and decide to move to the sidelines. That causes more folks to cut long exposure and the pullback begins to pick up steam. We still have some very good support, but we have more downside before we hit it.
Keep in mind that earnings season is starting soon and that creates a whole new set of market drivers.