The technical overview is bearish and approaching an extreme at which a bounce is likely.
Per the chart below, the S&P 500 breached major support from the December/January lows on higher volume. Rally attempts (i.e. last night's futures) are met with selling as the market looks to establish a new foundation.
Extremes in bearish readings, denoted by a high VIX reading as well as the Put/Call Ratio, suggest an impending bounce. In addition, stochastics (bottom of the first chart) are reaching oversold levels and reinforce the potential for a rally.
Market breadth as seen by the NYSE Advance-Decline line held up reasonably well, but is not a convincing positive. Note today (chart at 10:58 am) that the high/low ratio is trying to bounce, but early positives appear to be taking a backseat to the risk-off trade.
Our technical indicators below underscore the defensive nature of the markets, as bonds and defensive equities (staples vs. discretionaries) outperform.
So from a purely technical perspective, the edge has to be given to the bears. Tradeable rallies will ensue, and we will be on the lookout for an impending recovery. Stability in China and a cessation of oil's price decline are potential positives that can sustain a resumption of the uptrend as we move further into the new year. The economy is holding up reasonably well, as a bear market-induced recession is not a likely event. Bear markets happen due to recession, an inverted yield curve, or a liquidity crisis, none of which are on the immediate horizon.
We view this as a correction in a "consolidating" to slightly bullish market. Given the age of this bull market, modest annual gains (if not flat performance) may be in store.