As far as the $SPX chart goes, the 200-day moving average has proven to be the rock that is holding the market together. It stalled the first decline back in early February, and now $SPX bounced off it four times in the last week, refusing to fall below each time. This creates a support area in the 2585-2590 range. But if that is broken, things could get ugly quickly.

The intermediate-term $SPX chart is still negative because the 20-day MA is still declining, and there is a downtrend on the chart. So, any rally now is just to be considered an oversold rally until some improvement can be made in the $SPX chart. Even so, an oversold rally can carry back to the declining 20-day MA, which is currently at 2705.

The standard equity-only put-call ratio is beginning to roll over to a buy signal, but the weighted ratio is not.

Market breadth has improved enough that both breadth oscillators gave buy signals as of Thursday's close. We have noted, of late, that these breadth oscillators have been fairly accurate because of their ability to change direction quicky, much as the market does.

Volatility has been the strange part of this market. It was very accurate when the market first broke down in February. But since then, there are conflicting signals. The trend of $VIX is slightly higher, with is somewhat bearish. Meanwhile, the spike peak in $VIX is bullish for the short term.

In summary, there are recent oversold buy signals. These buy signals could generate enough strength to see a rally up to and slightly beyond the 2700 level. For more than that, it is going to take a strong improvement in the $SPX chart to reverse the intermediate-term bearish trend that is in place. Finally, if $SPX support is broken at 2585, all bullish bets are canceled.

Lawrence G. McMillan is the author of two best selling books on options, including Options as a Strategic Investment, and publishes several option trading newsletters.