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By Lawrence G. McMillan

The major indices all broke down this week, as the accumulated pressure that had been building up finally was released after a poor economic survey. There is resistance at the old highs (3020-3025) and now at 2940, where the breakdown took place. There is support at 2825, and then at 2720.

Both equity-only put-call ratios rolled over to sell signals. They are now trending higher and, as long as that is the case, these sell signals will remain in place.

Market breadth has been poor, although there has not been a 90% down day. Both breadth oscillators are on sell signals as a result.

Volatility indices have moved sharply higher. The $VIX close above 17 was negative and raises the prospect that $VIX is now in an uptrend. That is a negative thing for stocks.

In summary, the picture has turned negative, but we are going to be getting some short-term buy signals soon because a number of oversold conditions are already appearing. So, carry a "core" bearish position and trade short-term buy signals around it.

This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.

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