It may be hard to remember now, but 2022 actually started off with the stock market modestly breaking out to new, all-time highs. Of course, this was a tenuous break as there was very little participation in terms of small-caps and growth stocks. Since then, the market has basically melted lower except for a brief, oversold bounce between Jan. 10 and Jan. 13 that took the S&P 500 (SPY  ) higher by nearly 5%.

Yet, this bounce quickly rolled over, and the S&P 500 declined by 11% over the next 7 trading sessions until it bottomed just over the 4,200 level on Monday. From that low, the market finally found a bid and closed the session nearly 5% higher at just above the 4,400 level. This bounce wasn't exactly that surprising given that the market had gotten extremely oversold and reached several extremes in sentiment.

However, if we dig into last week's price action, it continues to feel more like an oversold bounce rather than a genuine bottom or even a multi-week, rally attempt. Here are some of the clues:

Weak Breadth

The market whipped around in a massive range between 4,220 and 4,550, and it ended the week about 1% higher from Friday's close. However, other than Friday, every day featured negative market breadth. As a result, market breadth continued to weaken through the week which is one indication that the market remains in distribution.

Cyclicals Weaknessy

While the selloff in growth stocks has been ongoing for the past few months, another recent development is that weakness has expanded to cyclical and material stocks. Thus, there are much fewer places for investors and traders to park their money. And this brings us to the next point...

Fed Policy Error Fears

The worst possible outcome for the stock market would be the Federal Reserve hiking while the economy was slowing. This has gone from a remote possibility to increasingly likely especially as Q1 faces some tough comps in terms of growth and consumer spending data. This combination can cause stock prices to spiral lower and fall further than most can imagine.

Geopolitical Risk

The final is that there is an increasing risk of war or conflict between Russia and Ukraine. It's uncertain whether the U.S. or NATO would intervene but that could cause a larger conflict. Finally, this is pushing oil higher which eats into inflation and consumer spending while also handcuffing the Fed due to its impact on inflation.