Wednesday's downside market reversal, coming as it did on the heels of a post-FOMC stock market rally, has caused the bears to become empowered and has seemingly converted quite a few people to the bearish camp in a blink. Little did we know that technical analysis was so in favor!

So, has "the" correction begun? Anything is possible, of course, but there is still plenty of upward price momentum in $SPX. It remains above the trend line that connects the March and July lows. There is support at 1040-1045, the area from which $SPX broke out in July. The rising 20-day moving average is at 1040 as well. So a close below 1040 would be negative, but the major trend line is what truly demarcates this bullish phase, and it is currently near 1000.



The equity-only put-call ratios continue to rise. Technically, they are thus on sell signals.



Market breadth has been very strong, keeping the breadth indicatyrs in overbought territory. Today's negative action, however, has pushed the oscillator down to the brink of sell signals. Previous breadth sell signals during this rally have not been particularly meaningful, as all corrections have been short-lived.



Volatility indices ($VIX and $VXO) both made yearly lows Wednesday morning, before the market reversed downward. The $VIX chart remains in a downtrend and is thus bullish for the broad stock market. A close above 27 by $VIX would break the downtrend, but the four similar previous such occurrences this year have not resulted in a rising trend in $VIX -- and that is the only way that $VIX would turn negative.



In summary, a seemingly large number of people have quickly turned bearish with Wednesday's negative market reversal. However, unless we see some signs of intermediate-term sell signals -- most noticeably a break of support in $SPX and a confirmed rising trend in $VIX -- we will not be joining the bearish throng.

Lawrence G. McMillan is the author of two best selling books on options, including Options as a Strategic Investment, recognized as essential resources for any serious option trader's library.