Short-term (minor signals) are oversold but there are also measures that usually mean the markets will probably have to spend some time forming a base. The Nasdaq 2106-2072 area and the S&P 500 1206-1183 area look like natural spots for the market to form bases.
Markets do not like uncertainties and Rita is an uncertainty. Even though there could be some stabilization of prices, the reality is that while the hurricane is at its current strength and trajectory, it will occupy the attention of the markets, and it currently sits. This uncertainty should prevent prices from making an heroic vault higher unless there are concerns about the impact of the hurricane expressed by members of the Fed, but statements like that would probably not be timely until after Rita has made landfall.
The VXO market volatility index is now reaching the outer edges of its envelopes of normalcy and if Thursday sees an opening drop and big volume, a shakeout, that pushes the VXO above the 13.44 level can be a sign of intraday oversold, but only if the VXO manages to reverse and head lower, undercutting 13.00. If that happens, bears short of positions will probably be willing to cover some shorts and this could provide the markets with a little relief. But at this time I do not think it would be more than just a token lift and part of a basing phase that still can see prices edging lower as part of the process. Patience is the watchword.
The Nasdaq has intraday resistance at 2118.13-2139.17, then important resistance at 2155-2162.09. Resistance is thick at 2158-2163, and is formidable at 2165-2186.83, with a focus at 2177-2186.83.
S&P 500 intraday resistance is 1218.99-1225.61, then 1232.15-1236.49. The index has formidable resistance at 1229-1242.62.
Nasdaq major support is 2106-2039, and it is a critical support, that, if broken would open the downside for sub-2000 prints. I expect this level (2106-2039) to hold. Inside the 2106-2039 support layer, there is a focus of support at 2106-2072 and this is still a likely spot for the markets to make a stand. Inside this zone is a focus of measures at 2087-2072 and prints inside this area should compel short covering.
The S&P 500 has well-defined support at 1206-1165 with a focus of support at 1206-1183. This is a very strong layer of support and is expected to hold. The index has generated a close under 1218.02 and this (in my view of the charts) has increased the chances for another test of the 1206-1193 area.