Thursday's negative action was confirmed by the technical indicators.

First, the $SPX chart: There is clearly a lower high and lower low on the chart, and that sort of pattern is intermediate-term bearish. The next support level is 1020-1030, and it looks like that will be tested in the next few weeks, oversold conditions not withstanding.



The equity-only put-call ratios are negative, as they have been for some time. As long as they continue to rise, they will remain bearish.



Market breadth has returned to deeply oversold status. One should not consider buying at this point, though, for oversold conditions are sometimes breeding grounds for some of the nastiest market declines.



Volatility indices ($VIX and $VXO) literally exploded on the upside on Thursday. This raises the distinct possibility that $VIX is in a bearish (for the stock market) uptrend.



In summary, the picture is bearish. We have been saying in our daily commentaries this week that the technical indicators were mixed, but the bearish $SPX chart over-ruled all. That is still clearly the case, with the only proviso that oversold conditions indicate that sharp, but short-lived rallies are possible at any time.

Lawrence G. McMillan is the author of two best selling books on options, including Options as a Strategic Investment, recognized as essential resources for any serious option trader's library.