Various indicators have been turning bearish since mid-November. But until this week, $SPX itself had not broken down, and since price is "king," that was quite important. However, now $SPX has broken down, as it has fallen below support at 2050. This completes a bearish pattern, and a full-fledged correction is underway. This could be sharp and short-lived, and since it is taking place late in the calendar year (when seasonal bullishness occurs), that is probably the case. However, it should be respected until buy signals actually occur.

Equity-only put-call ratios rolled over to sell signals about 10 days ago, and those signals remain strongly in place. Market breadth has been weakening for several weeks, as the breadth oscillators gave several sell signals which were subsequently aborted. But this time, the sell signals took hold, and they remain in force.

CBOE volatility indices have exploded to the upside. $VIX closed above last week's highs, and that established an uptrend in $VIX, which is a sell signal for stocks.

In summary, the indicators are negative, and with $SPX falling below support, it has released selling like the breaking of a dam. It is likely that the correction will be short-lived, but we are not going to trade the long side until buy signals are confirmed.

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.