The initial selling on Wednesday afternoon was probably just some profit-taking by traders who'd bought heavily on Monday and Tuesday. But then the selling gathered momentum.

As for the $SPX chart, there is likely to be resistance near the 1600 level, where there was previously support. However, the speed with which the market tore through the support levels on the way down may indicate that it could bounce right up through them as well. If the decline continues, it should find support at 1560-1570 and then major support at 1540.

Equity-only put-call ratios have not wavered from their sell signals at all. Market breadth improved greatly early in the week, but completely imploded in the last two days. Breadth indicators are on sell signals, but oversold. $VIX continues to rise, and that is bearish for stocks.

In summary, all the indicators are bearish right now, but there are some severe oversold conditions that have quickly developed. Aggressive short-term traders can play oversold rallies when indicators set up, but the intermediate-term picture is for lower prices.

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.