Aniket PujariThe S & P 500 is attempting to rebound from the lows set Thursday. It’s still too early to tell if this low will hold and a new rally was born. To help answer this question, let’s open the proverbial market hood to examine three internal gauges of the market engine. We’ll refer to these simply as “market internals.” I’ll try to explain some of these more in-depth metrics more clearly than a mechanic would explain to us how our car engine is going to be fixed and how long it might last. To start, let’s use a market internal that you may have heard of: the Cboe Volatility Index (VIX) . The VIX is referred to as the ‘fear index’ and measures how expensive S & P 500 options are at strike prices relatively close to the current market price. The higher the price of the options, the more in demand they are which almost always corresponds to fear and uncertainty as traders hedge stock portfolios holdings. So, VIX usually trades inversely to the S & P 500. The key to finding potential reversal points in the stock market is to use the internals at turning points that either confirm the current trend, or non-confirmations that the stock market trend may reverse. In the case of the VIX, a spike higher followed by a lower-high, coupled with a lower-low in the S & P 500 price, is an example of a non-confirmation. A quite significant VIX non-confirmation happened in December and January that set up a rally into February. A smaller non-confirmation is happening with the VIX at the two most recent market spikes in March. The recent VIX surge on March 13 was a lower-high while the S & P 500 that made a lower-low. You can interpret this as option traders not aggressively hedging via long puts despite the S & P 500’s lower-low in price. In other words, fear is subsiding. Moving away from options internals to breadth indicators, we have the NYSE Advancing – Declining issues indicator. As a bull market powers on, you would like to see more advancing issues than declining ones, indicating mass participation in the rally. In the case of bear markets that are expected to continue lower, the opposite should be true. But again, the predictive power is in the turning points with non-confirmations, also called divergences. Notice how the S & P 500 in red made a low in March, but the Advance-Decline difference line made a higher-low. The breadth in the mid-March decline is drying up. Fewer stocks are being sold. Finally let’s look at the NYSE TICK chart. This is the most advanced internal and measures the number of up-ticking stocks versus down-ticking stocks on the NYSE second-by-second. When you see a clustering of -700 to -1200 TICK readings, that means literally this second there are 700-1200 more down-ticking stocks than up-ticking ones. This detects when institutions are doing “program sells,” which is when they liquidate a basket of stocks in one big automated block trade. They could be selling S & P 500 , Nasdaq-100 , or even all stocks in the XLK (technology ETF). The same is true for extreme positive TICK readings in the case of program buy trades. Again, you’re looking for non-confirmation divergences in NYSE TICK based on the 20-period moving average to smooth out the erratic readings. You’ll see a nice TICK divergence in December and January that traced a higher-low as the S & P made a lower-low, to then reverse and rally into February. The same is happening again with the February low compared to the March 11 lows in NYSE TICK. Are these three market internals signaling that a tradable low is in place? My best guess is yes. As we turn to the S & P 500 daily chart with a 60-minute chart inset, we see the retracement levels that must hold relative to the March 13 low. We should hold above 5,579 and 5,545 to keep alive hopes of a sustained recovery. If I’m wrong, then 5500 breaks and we’re probably headed down to the Q4 of ’24 lows of 5,405 and from there we’ll start the process over again. -Todd Gordon, Founder of Inside Edge Capital, LLC DISCLOSURES: Gordon is long the market in his holdings at Inside Edge Capital, but carrying SPX put option hedges. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. 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