Note the recent spike in the CBOE put/call ratio. Spikes in the ratio have been a nice tell recently for market lows, as excess pessimism has indicated that weak longs have been shaken from their positions.
What makes this spike different from recent ones is that it is not occurring at a higher price low. In a bull market, you want to see stocks hitting oversold levels and bearish sentiment levels at successively higher prices. The retracement of the late 2009/early 2010 strength suggests that a longer-term topping process may be occurring, fueled by monetary tightening in China and the relative weakness of many non-U.S. equity markets.
We traded below the Friday lows overnight; I will be watching closely to see if that break holds. Note also that we established value in the mid-1090s in the ES contract during yesterday's trading session and have rejected that during the overnight trade. Acceptance of value in the 1080s (or lower) during today's day session would continue the market's downtrend.
Meanwhile, we're on Fed watch, with tomorrow's announcement likely affecting the willingness of traders to make commitments today. The weekend indicator review reviews the signs of strengthening I'll need to see before committing longer-term positions to the long side.
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