When the best thing you can say about stocks on the first day of the new trading year is "the pullback was so steep it set up a dead-cat bounce," then you know you're starting the year out on a pretty lousy foot. Well, bad news - today's pullback was so steep it set up a likely dead-cat bounce for later this week. Truth be told, I don't know that I'd be sweating Monday's weakness too much for the long haul. Between the calendar and China's news, the strong dip may or may not be a true reflection of the market's future. On the flipside, the terrible start to 2016 may have spooked a lot of traders who were on the fence, locking in a short-term pullback now that some key technical floors have been broken. We'll take a look at it all below, but first, I want to get 2016 started with a look at crude oil. It was largely the reason 2015 was a tough year, but based on ALL the data, I'm not sure this year is going to be a heck of a lot better for oil prices. I do, however, suspect some oil stocks could end up dishing out much more pain this year than they did last year. No, U.S. Oil Production is as Strong as Ever You may recall back on December 15th we pointed out that all the oil companies' hedging that saved them from financial disaster in 2015 were finally starting to expire (and couldn't be renewed), which in turn would mean many of these companies would start to habitually post big losses in 2016. Consider this a follow-up to that commentary. One of the conclusions we made then was the only thing that could help energy companies recover in 2016 was a firm rebound in oil prices. Today we'd like to show you how - as of the beginning of 2016 anyway - a meaningful recovery in oil prices just isn't likely. Some of you who've been watching the Baker-Hughes (BHI) rig count total fall precipitously since September of 2014 may disagree. As they say, there's more to the story. For those of you not familiar with it, the Baker-Hughes rig count index is exactly what it says it is... a tally of the number of active/operating oil rigs in the United States. That total fell to 536 last week, from a peak of 1592 in September of 2014. Such a plunge would theoretically mean the total amount of oil U.S. drillers and explorers were extracting was shrinking. With a reduction in supply, it was only a matter of time before the law of supply and demand kicked in and the price of oil bounced, right? Problem is, while the rig count has been falling, the total amount of oil production in the U.S. hasn't been falling. I was digging pretty deep into this matter last week and last weekend, and wasn't entirely surprised to find data to support my thesis that, though the total number of active rigs is falling, the output per active rig is rising. This in turn means there's been no net change in U.S. production. The charts tell the tale. From top to bottom is the amount of crude oil stockpiled in the U.S., the amount of oil being delivered to U.S. refineries, and how much of the nation's refining capacity is being utilized. Though it all ebbs and flows, as you can see, the nation's oil producers are still producing as much if not more than they were before oil imploded in mid-2014. Like I mentioned a couple of weeks ago, I get the feeling all of these oil drillers are waiting for "the other guy" to be the one to stop production, not wanting to do so themselves. With that as the backdrop, the mostly-pessimistic view the EIA has on oil prices this year makes a lot of sense. The agency predicts crude will be at $52 per barrel by the end of the year, while the futures market says it's going to be close to $48 per barrel a year from now. That's not a level many oil drillers can withstand for very long. Things change, including supply and demand for oil. So, don't get married to the idea. Things are slow to change, though, and this outlook based on all the data doesn't bode well for the energy sector anytime soon. As for what you do with this information and where (and when) crude oil is most likely to find a bottom, well, I'll once again give a nod to John Monroe over at the Elite Opportunity newsletter, who's far better armed to spot the outright bottom than we are here at the end-of-day newsletter. We work with data, which is always lagging. He works with data too, but he understands the chart of oil prices has a life of its own and can predict changes in the data as much as data can drive the oil price chart. That head-start of a few weeks he can give you when crude oil finally makes "the turn" is where the big bucks can be made in short order. I suggest you sign up for the EO service if you'd actually likely to turn my aforementioned theory into an actual trade. Here's how, or cut and paste this link: https://www.smallcapnetwork.com/pages/SCNEO/v1/ Don't Step Blindly Into a Bounce I wasn't kidding above when I said the best part about today's loss was the likelihood it will lead to a bounce. In fact, the bounce is already happening. The question is, how far will the bounce travel before running out of steam? In the grand scheme of things today's partial intraday reversal makes sense. On the chart of the S&P 500 below, all it took was a kiss of the lower Bollinger band and the brush of a semi-important support line (dashed) to draw the bulls back in. You can also see the VIX bumped into its upper Bollinger band and immediately started a pullback effort. So now what? All I can say is, one decent rally effort doesn't undo several days' worth (weeks' worth, now) of damage. The market may end up bobbing back and forth here for a while, but the undertow remains bearish... at least a far as a I see it. There's a lot more working against stocks than for them. The S&P 500 could move all the way back to the 2075 level and still not actually snap out of this funk and back into an uptrend. And if the S&P 500 does happen to get and stay below the floor around 2000, as we've been saying for a while now, there's not a lot left to prop the market up beyond that point. As Tom Petty put it, the waiting is the hardest part.