There's a very simple principle that I've found helpful in tracking markets. When a rising market is gaining strength (i.e., expanding the number of stocks making fresh 20-day highs, expanding momentum per the Demand/Supply Index tracked on the Trading Psychology Weblog), that rise is likely to continue in the short run. Similarly, when a falling market is accelerating to the downside (i.e., expanding the number of stocks making fresh 20-day lows, losing momentum per the Demand/Supply numbers), the decline is likely to continue in the short run.
It is when rises and declines become more selective and lose momentum that we're likely to see reversal.
On Monday, we saw 3274 stocks make fresh 20-day lows across the NYSE, ASE, and NASDAQ, against 250 new 20-day highs. That's the highest level of new lows since the recent decline began, and it's the highest level I can recall in years. Supply is ahead of Demand by almost 7:1. That means that seven times as many stocks are closing below their moving average envelopes as above them.
In short, we have a declining market that is gaining weakness to the downside. This fits with the findings from the Relative Dollar Volume Flow data, and it means that the large market participants who move these markets are not yet finding value at these lower price levels.