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By Lawrence G. McMillan

The bulls seemed to think they were in charge up until the latest CPI data was released. Then, in an abrupt change of face big money began to sell on Sep 13th and just kept driving the market lower all day. That selling has continued, at a slower pace, and the support area at 3900 has been violated. That is important support, and now traders are looking to 3800 as the next support level, and then the yearly lows at 3673 below that.

Equity-only put-call ratios remains on sell signals. As long as the ratios are rising on their charts, that is bearish for stocks. Both ratios never did turn bullish during the rally in the first part of September, and now they are moving sharply higher as put buying accelerates. They are near an oversold state, perhaps, but they will only turn bullish if they roll over and begin to decline.

At this point, both breadth oscillators are on sell signals and are in oversold territory. That could easily be reversed with a strong day of positive breadth, but it doesn't appear that today will be the day.

$VIX has probably been the most bullish indicator, merely because it has never gotten in synch with the bear market. There have now been three $VIX "spike peak" buy signals that were all stopped out for small losses. A new one is setting up now, because $VIX is in "spiking" mode once again. In addition, the trend of $VIX buy signal has been stopped out as well.

We continue to recommend a "core" bearish position, mainly because of the downtrend on the $SPX chart (blue lines in Figure 1). We will trade other positions around that, using stops on all of them.

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

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