"Stock prices continue to behave bearishly," caution David Nassar and Larry McMillan, options experts and editors of the industry-leading The MarketWatch Options Trader.

Here, they offer a bearish market overview along with a bullish look at beverage stocks -- along with an options play on PepsiCo (NYSE: PEP).

The advisors explain, "Rallies can't gain footholds, while declines are deeper and more long-lasting than seem possible. As a result, there is an oversold condition in this market -- one which can spur sharp, but short-lived rallies at any time -- but a true intermediate-term buy signal is not at hand, for none of our indicators have turned bullish.

"The Standard & Poor's 500 turned bearish when the index fell through what had been support at 1490. That was the last piece of the bearish puzzle. The market has been under extreme pressure ever since. Any rallies towards 1490 can be sold, as that level now represents resistance.

"Meanwhile, where is support? It was at 1430-1440, but that level gave way and it seems likely now that the averages will test 1410 (the August closing lows) and perhaps 1370 -- which is multiple support from both August and March.

"Should that give way, then a true bear market would be underway. Support levels are somewhat meaningless in a nasty decline like this anyway; it is more important to monitor oversold conditions.

"Resistance on the S&P 500 chart is strong and formidable," notes options expert David Nassar, who believes a close above 1505 is needed to confirm an upside breakout. (The index closed today at 1471). That, he says, would be the final determination that the bottom has been made. Conversely, he notes, as long as that upside breakout does not occur, the picture remains more bearish than bullish.

In The Marketwatch Options Trader, the analyst explains, "The last rally stalled out at the 1480 level, but the 1490 level has been the more common failure point. Either way, that area is going to be tough to break through. The one time that it was penetrated on a closing basis was in early August, and it fell back after just one day's close."

For the technically-inclined, he notes that the equity-only put-call ratios have improved this week, and the standard ratio has officially given a buy signal. However, he counters, "Market breadth has been all over the place and we now have new breadth sell signals in place."

Finally, he notes that the volatility indexes continue to remain at fairly high levels, which he says can't be considered too bullish. Further, he adds, "Now they rate as neutral at best -- and could easily be interpreted as bearish if they continue to rise."

The advisor concludes, "We would not grade the S&P 500 chart as bullish unless and until it can close above 1505 (or perhaps a two-day close above 1490 would be sufficient). But something on that order is needed. Lacking that, the chart is neutral to bearish."

Each day, Steven Halpern's TheStockAdvisors.com features the latest stock picks and investment ideas from the nation's leading financial newsletter advisors.

In The MarketWatch Options Trader, David Nassar takes a look at the Fed's recent actions, the outlook for the overall stock market and an options play on Sears Holdings (NASDAQ: SHLD).

He explains, "The Fed's infusion of liquidity seems to have turned the tide in favor of the bulls -- at least for now. However, lest one think that everything is 'go,' it is useful to note that 'V' bottoms in the broad market are very rare. "

Rather, he notes, it is much more typical for the first rally (i.e., the one we're having now) to eventually give way to another decline. Nassar states, "If that decline does not fall below the previous lows, then a bullish pattern can arise. This is the pattern of nearly every bottom in the last 20 years."

Therefore, he suggests, "While we respect the strength of the rally and realize that more Fed moves could result in higher prices short-term, we still think there is a reasonable chance that the closing Standard & Poor's 500 Index lows at 1407 or the intraday lows at 1370 will be retested sometime in the next few weeks."

Time-wise, he suggests, "Occasionally, these retests take longer (at the 2002 bottom, for example, the initial lows in July were retested in October -- and then again the following March). In between, strong rallies can erupt, but eventually it is the retesting mechanism that delineates the true bottom."

In the meantime, he sees upside potential in Sears Holding. He explains, "The stock has tentatively completed a bottoming formation, when it broke out over 140 yesterday."

For those familiar with options trading, he concludes, "While options are pretty expensive here, and earnings are due on August 30, we think this is reasonable speculation." The trading expert recommends the Sears Holding October 140 calls at a price of $10.80 or less. If bought, he counsels, stop yourself out on a close below $133.

Each day, Steven Halpern's TheStockAdvisors.com features the latest investment ideas and market commentary from the financial newsletter community.