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By Lawrence G. McMillan

The market has quickly become extremely oversold again, and thus short-lived rallies are possible.  In the bigger picture, bears see a break of the recent uptrend dating back to early August.  Bulls see a successful retest of the lows.  A move to new lows below 1100 will prove the bears right; otherwise, the bulls still have a chance to rescue the market.

The equity-only put-call ratios have been on buy signals for a few weeks but they are beginning to weaken now.

Breadth indicators gave sell signals this past Monday, and are now extremely oversold.

Volatility indices rose sharply again, remaining in a generally bearish mode.  Another spike peak buy signal would be short-term bullish.

In summary, the last two days have violated some important technical levels, but they have also generated yet another severe oversold condition.  The next short-term rally may tell a lot about the condition of the market.  If it cannot carry beyond 1160, then the trend is bearish, and we would look for a bottom sometime in October.

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