The selling that began on Monday morning, June 21, continued pretty much unabated for more than two weeks. In so doing, a rather severe oversold condition was created, and the market got a superb relief rally from that.

The chart of $SPX is clearly in a downtrend. There is support at 1020 and resistance at 1080.





The equity-only put-call ratios briefly turned to sell signals, but the standard ratio is back to a buy signal, and the weighted ratio is at very extreme levels, from which a buy signal may emerge.




Market breadth indicators with Wednesday's rally, have rolled over to buy signals.




Volatility indices (VIX and VXO) have been among the most bullish indicators of late.




Breakouts in either direction should be respected. If $SPX breaks out over 1080, we'll become more aggressively bullish, but until then, this is just an oversold rally.

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.