The good news is that the market is now maximum oversold as shown in the chart below. Maximum oversold does not mean that the market must rally but it should be more difficult for the market to make much headway on the downside.
The not so good news is that sentiment does not yet seem to have swung back to excess bearishness although the extreme bullishness is certainly gone. The chart below is the 10 day moving average of the CBOE put call ratio.
I have marked previous peaks in put buying with arrows. As you can see, the current level of put buying has increased but is not yet at levels seen at prior troughs. The same is true for the Rydex data and sentiment surveys. Anecdotally, I do see some people starting to worry and have been hearing some pretty dire predictions.
In summary, I would love to see another down day or two that moved sentiment inline with the maximum oversold condition. I believe at that point a rally would be a very high probability event.