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This funky trading might mean something

Traders work on the floor of the New York Stock Exchange.
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Traders work on the floor of the New York Stock Exchange.

As traders await earnings season, the stock market may be sending a warning sign.

In the past two sessions, stocks have given up early rallies to lackadaisical late-day trading. The Dow, up more than 150 points early Monday, finished the day with a loss of 20 points. On Friday, it closed up 35 points, giving up nearly 120 points.

"This is a rerun of Friday," said Art Cashin, UBS director of floor operations at the NYSE. "I think they're pretty well convinced this whole run higher in crude is a short squeeze. It's not going to have a long life." West Texas Intermediate crude futures rose 1.6 percent to $40.36 per barrel.

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Oil has been less correlated with the stock market recently, especially when it moves higher, but the outcome of a producers' meeting on the weekend could determine direction for weeks to come. OPEC and non-OPEC oil-producing countries will meet in Doha, Qatar, next weekend, and if they do not agree to a freeze, it is expected oil will begin to fall again.

The S&P ended down 5 points Monday at 2,041. "The high of the morning was at 9:50 a.m. ... Then they ground lower for the rest of the day. That's not bullish action. That's faulty action," said Scott Redler, partner at T3Live.com. "Basically the market has been wearing out both sides of the tape. That's what happens before some type of move. We at least could see the 200 day on the S&P which is down near 2,015."

"Gold's strong. You have the miners strong. Bonds are bid and strength has been sold. It will be interesting to see if (the S&P) breaks below 2,033, and if sellers can press that 2,015," he said. "I would think we have downside follow-through tomorrow."

A catalyst that could steer the market is the earnings season, which started Monday with Alcoa's report. The industrial giant's stock fell after it reported a profit of $16 million, down sharply from $195 million. The next important group is Wednesday when JPMorgan reports.

"If JPMorgan misses but goes up that could give some clues that you're going to get a little bit of a reflex rally. If JPM misses and goes lower that could pressure the market further. If it beats, it will be hard for the market to go down," said Redler. The financials have fallen 7.3 percent year to date, and are the worst-performing sector.

Some traders are looking for a bounce back in financials but Redler was skeptical. "If the banks don't respond and respond poorly to a lowered bar they (could) become too much of a headwind and move the S&P lower," said Redler.

Read MoreCiti: Time to buy financials

Michael O'Rourke, chief market strategist at JonesTrading, said he expects earnings season to follow the pattern of being mostly better than expected when it comes to earnings per share. "I'm bearish but I believe with the earnings expectations analysts have set the bar low. I wouldn't be surprised, if relative to expectations, earnings come out OK. That doesn't make it good," he said.

There are just a few economic reports Tuesday. The NFIB small-business survey is released at 6 a.m. EDT; import prices are at 8:30 a.m. and February's budget is at 3:00 p.m. Earnings are expected from Fastenal and CSX.

There are three Fed speakers — Philadelphia Fed President Patrick Harker speaks at 9 a.m. EDT, San Francisco Fed President John Williams speaks at 3 p.m. and Richmond Fed President Jeffrey Lacker at 4 p.m.

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