The forces of mean reversion helped start the market decline that began in mid May, resulting in a slightly overstretched, but not a deeply oversold, market. Market breadth confirms this, but given the market behavior over the past year, we are not oversold enough yet to see a sustainable bounce but we may get a few positive sessions. Sentiment indicators (Equity P/C Ratio 10MA and VIX 10MA) are showing a noticeable rise in fear, but again not to unusually high levels. So, what can we expect on the basis of these technicals?

Unless we have put the global economy worries completely behind us, these indicators are not at extremes warranting a major rally.