Although the S&P and Dow are likely to test their August lows in the not-so-distant future, it does not mean they won't suddenly surge higher before doing so. But if the anticipated bounce does not come, panic selling could easily send the major indices to test their August lows rather quickly.

Deron Wagner still likes the relatively bullish patterns in the Biotech and Utilities sectors.

Options expiration should make Friday afternoon even more interesting. The best plan of action today may be to simply focus on managing existing positions, rather than looking to enter anything new.

Yesterday's price action in the UltraShort Oil and Gas ProShares (DUG) was weak throughout the first half of the day, but it reversed after testing an area of triple convergence. Whenever technical convergence of support is present, the support level becomes even more powerful.

For now, the odds clearly favor short selling the weak sectors into the market's bounce, as opposed to buying into strength.

Yesterday's price action again had the feeling of steady selling, as opposed to panic dumping of shares. Unfortunately, this means we have not yet seen the extremely negative levels necessary in order to put in a market bottom.

The Nasdaq Composite is now showing its true colors, as the tech-heavy index plays "catch up" to the prevailing weakness in the S&P, Dow, Russell, and Midcap indices.

Following through on momentum from the previous day's sell-off, both the S&P and Dow rung up substantial losses yesterday morning, but a relief rally in financial stocks enabled the indexes to recover into the close. The Nasdaq wasn't as fortunate.

The tug-of-war we've been seeing between the bulls of the Nasdaq and the bears of the S&P and Dow may be nearing an end, with the bears taking the upper hand.

Within the main stock market indexes, the small-cap Russell 2000 remains the weakest link, and is technically in a confirmed intermediate-term downtrend.