It is almost unfathomable to think that, exactly a mere two weeks ago, $SPX was at 1345 and there were thoughts that an upside breakout was possible. Now, two weeks later, in a move that can only be described as panic, $SPX is at 1200 with no floor in sight. Oversold conditions have ballooned to near-historic levels in some cases, but as the last few trading days have shown, "oversold" does not mean "buy."

Theoretically, there is $SPX chart support in the 1180-1200 area from last November.

Equity-only put-call ratios rolled over to sell signals last week, and they remain firmly locked on those sell signals now.

Market breadth has reached oversold levels of near historic proportions. The only more oversold readings in history were in October and November of 2008.

Volatility measures are finally starting to catch up with the $SPX price drop. A spike peak in $VIX would be a buy signal.

In summary, the intermediate-term is negative, but the oversold conditions of historic proportions are sufficient to produce a monster counter-trend rally back towards the 20-day moving average.

Lawrence G. McMillan is the author of two best selling books on options, including Options as a Strategic Investment, and also publishes several option trading newsletters.