Volatility has returned with a vengeance. The bulls are very excited about the rally of the last two days. Perhaps they are correct in their euphoria, but we don't yet see it in the technical evidence.

The violation of the 1390 support level this week turned the $SPX chart negative. This is something quite serious, but it if holds, that would be bullish.

When the market broke down on Monday through the 1390 support level, several other technical indicators turned bearish as well. First and foremost were the equity-only put-call ratios.

The heavy selling early this week pushed breadth indicators to an extreme oversold condition. They are now on buy signals.

Volatility indices bounced sharply upward and then retreated. $VIX broke up through the 17 area, thereby turning modestly negative. $VIX spiked up to 21 and has now has closed back below 18. That is a bullish spike peak $VIX reversal.

The recent two-day rally is just a pullback to the resistance area at 1390. Any further rally will need to be based on more than an oversold condition. An $SPX close above 1400 would be bullish.

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.