The Standard & Poors 500 Index ($SPX) bounced strongly off of support at 2040 last Friday. That level remains strong support, with resistance at 2110.

Equity-only put-call ratios rolled over to sell signals last week, and while there was some flirtation with a new buy signal by the standard ratio, both of these put-call ratios are back on sell signals once again.

Market breadth has remained relatively weak, although the back- and-forth market action this week caused some consternation in these breadth indicators. The NYSE-based breadth oscillator canceled out its sell signal after Tuesday's big up day, but it has since been reinstated. The "stocks only" oscillator has remained on a sell signal.

Volatility derivatives and indices have retained a bullish position through the current market decline of 70 $SPX points. Thus, traders are not "worried."

In summary, $SPX has corrected from its April highs. As long as support holds at 2040 on $SPX, this will be merely a correction. However, a breakdown of that support level would open the door to much more bearish scenarios, including the possibility of eventually taking out the January lows.

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.