The stock market broke down this week, violating support levels and generally turning the technical indicators bearish. An oversold reflex rally has more room to run, but the intermediate-term trend is now downward.





Equity-only put-call ratios, which had been somewhat ill-defined for a while, registered confirmed sell signals and remain bearish.




Breadth has been poor during the decline, and breadth indicators are bearish, but oversold.




The spike upward and back down in $VIX is a short-term buy signal.




In summary, the selling has been heavy. So heavy, in fact, that some rather strong short-term buy signals have been registered. Thus, the rally that started on Thursday might carry all the way back towards the now-declining 20-day moving average on $SPX. But, for now, the intermediate-term trend is downward, and thus such rallies should be for traders only, with an eye towards establishing bearish positions as $SPX nears the 20-day moving average.

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.