The bears seized control with heavy selling over the past two days. However, all is not lost, but the bulls certainly squandered what could have been a good opportunity. The $SPX lows today were 1209, with a close at 1216. This is just barely clinging onto the old support range (1215-1230). A rally from this level would be viewed as just another probe to the lower end of the wider trading range.

Equity-only put-call ratios, however, turned negative. That is a major change for these intermediate-term indicators.

Market breadth rolled over to sell signals on Wednesday, and they solidified today.

Volatility indices ($VIX and $VXO) rose rather grudgingly on Thursday. This is a bit strange, but days like this have been bullish divergences in the past.

Based on the bigger picture of the intermediate-term buy signals that we have laid out in the newsletter in recent issues, we still think this market can rally. The biggest problem is that nervous and fearful traders are skittish and will sell on almost any news item that is perceived to be negative.

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.