This week's selling drove $SPX down to the lower end of its bullish trading channel. The selling managed to dissipate right near the lower channel, and so the bullish pattern is maintained.

Equity-only put-call ratios have remained bullish throughout this recent decline, just as they have generally remained bullish since generating intermediate-term buy signals right near the June stock market lows.

Market breadth wavered early in the week, but are back on buy signals now. $VIX spiked up to 21 and back down again, thereby creating a spike peak short-term buy signal.

In summary, the technical indicators did not suffer any severe damage during the market's 3-day decline. Therefore we continue to look for higher prices ahead. A return to the top of the uptrending $SPX channel would take prices to about 1400 or slightly higher in the short term.

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.