"The August lows now represent important technical levels defining the U.S. markets' primary uptrend," notes Michael Ashbaugh. The editor of The Marketwatch Technical Indicator explains, "Specifically, the S&P 500's August low holds at 1,427 while the Nasdaq's August low holds at 2,492. In addition, the Dow's August low holds at 13,134.

Ashbaugh continues, "For the Nasdaq and the S&P, a break below those levels would mark a failed test of support, also placing each index under its 200-day moving average. And if the breakdown were decisive, the primary trend would likely turn lower.

Yet "as ugly" as the current backdrop looks, he contends, from a strictly technical standpoint, the primary uptrend still has the benefit of the doubt.

Meanwhile, he suggests, we continue to find some names that are well positioned technically. These, he says, are intended as radar screen names - sectors or stocks positioned to move near term. In this light, the technician sees ongoing strength among chip-equipment names.

Ashbaugh says, "Each of these names broke out decisively in mid-July. Since then, Lam Research (NASDAQ: LRCX), ASML Holding (NASDAQ: ASML) and KLA-Tencor (NASDAQ: KLAC) have pulled in, establishing support around the breakout point. Further, he adds, Applied Materials (NASDAQ: AMAT) and Varian Semiconductor (NASDAQ: VSEA) are the group's strongest names, knifing even higher after the initial breakout, despite a down market."

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