A week ago, $SPX was still pushing higher. Then, in the blink of an eye, $SPX gapped sharply downward on Monday morning -- leaving a huge gap on the chart that likely isn't going to be filled anytime soon.
Nearly every indicator we have is in oversold territory, and there will be buy signals in the relatively near futures, but there are none at this time. Support levels don't mean much right now, so it's fruitless to try to identify them.
Equity-only put-call ratios gave sell signals in mid-January and then lumbered sideways for a couple of weeks. But now they are moving higher again -- especially the weighted ratio.
Market breadth has been horrendously bad, and three of the last four days have been "90% down days." Both breadth oscillators are extremely oversold, but it would take more than a couple of days of positive breadth to roll them over to buy signals.
Volatility has been very wild. $VIX is now "spiking" again, and will issue a new buy signal when it completes the spike -- probably within a couple of days.
Meanwhile, the intermediate-term trend of $VIX remains negative. It turned negative just over a week ago, on February 20th, when $VIX closed above its 200-day Moving Average and the 20-day Moving Average was also above the 200-day. This intermediate-term sell signal will remain in place as long as both of those entities remain above the 200-day.
In summary, there is total panic in the markets right now, as technical support levels mean nothing. These massive oversold conditions will eventually lead to buy signals. The last time we had anything close to this many oversold conditions was on December 24th, 2018. The rally from there was a strong one. There has been more damage done now, and this is perhaps a medical crisis, not a financial one, so things could be different. But eventually, there will be buying. It is a matter of remaining patient and waiting for confirmed buy signals. Meanwhile, long put positions should be rolled down, but not closed out completely.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.