The market took a beating yesterday, as $SPX finally got in line with the indicators, most of which had turned bearish in the last week or so. $SPX closed just below 2040, which technically is a violation of the previous trading range (2040-2135). However, as you can see from the chart in Figure 1, it's still in the general area of the low of the range. If prices should rally from here, we would certainly say that the trading range has held. So, we would require a second close -- lower than Thursday's -- to verify that a downside breakout has indeed occurred.

Put-call ratios rolled over to sell signals recently. The weighted equity-only put-call ratio was the first to go, issuing a sell signal over a week ago. The standard ratio followed suit this past Tuesday.

Market breadth has been weak. Both breadth oscillators are now on sell signals and both are in oversold territory.

Volatility has been the single most bullish indicator for years now. Traders have basically refused to get excited about the upside potential of volatility, and they have been right in that regard as the stock market has trended higher and higher since late 2011. Yesterday's big market drop did spur $VIX to break out on the upside. It closed on its highs, just above 19. $VIX is now trending higher, and as long as that is the case, it's bearish for stocks.

To summarize: the intermediate-term indicators are negative: put-call ratio sell signals, breadth oscillator sell signals, and $VIX trending higher. But for actual intermediate-term bearish confirmation, we would need to see $SPX close below Thursday's low. Meanwhile, short-term oversold conditions are in effect, which could cause a short-term rally early next week.

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.