The S&P futures dropped 10 points overnight but have recovered most of those losses. I believe that type of drop during the regular session would probably produce enough fear so that we can finally rally for more than an hour.
To summarize, we are oversold and the 10 day moving average of the put/call ratios are consistent with what we generally see before a bounce. However, we have not seen much fear or panic and there has been very heavy stock issuance this week, including the re-IPO of AIG. While the bulk of the stock issuance is behind us it might take a few more days to digest.
Tactically, I am short some SPY puts and only have a single core long, CA Inc.. I would be willing to get more aggressive on the SPY if we finally see some fear in the market. However, even in that case it would likely just be a trade where I am looking for a percent or two.