The action of the past two days can be classified as a weak response to the decline. This must be disheartening to the bulls. There's been some pretty good buy signals fizzle out (so far).

The thing I'm watching is the LQD and the HYG. The LQD is the high grade corporate bond ETF. The HYG is the high yield version.
The LQD has been holding up quite well during this sell off. In fact it stands near a recovery high tonight.

The HYG has shown the weakness I'd expect, as high yield more closely correlates with stocks. However it was up today much more than stocks.

If we're about to embark on the next leg of a deflationary spiral from this point in the calender, then I'd expect LQD and especially HYG to begin to weaken very soon. If they don't, I'd be careful about being short equities.

Their strength could be a sign that at least one more push up into September is in store. A rise into that time frame is what a lot of folks have been looking for, myself included.

There's no denying that stocks are very weak in here. But support at 880 has (basically) held for two days now, and that's positive. Perhaps a rise tomorrow to test the bottom of the H&S trend line will bring out enough selling to drive it below that level on a weekly close. Perhaps.

So watch the LQD for signs of liquidation. If it doesn't start soon, it may not be time for that next leg down.