People walk outside of the New York Stock Exchange. Spencer Platt | Getty Images

If the market always speaks a message, then Wednesday's 800-point tumble in the Dow Industrials and 3.3 percent break in the S&P 500 can be considered the market shouting for attention. But what is it saying, and how can investors separate the signals from the noise? Let's first note that Wednesday's message, dramatic as it was, was not really a new one, but an accelerated version of market action that's been evident for weeks. As noted here and everywhere since mid-summer, an unusually large number of stocks have been lagging the rally in the headline indexes. The small-cap Russell 2000 was already down 7 percent from its high even as the held near a record. Housing, auto, airline and semiconductor stocks – to name a few groups – were in steep downturns. So the big one-day drop was essentially the large-stock benchmarks succumbing to the pressure that had already cheapened the majority of stocks. This can be viewed as a positive, because by Wednesday's close the market looks a good deal more "oversold" and washed out than was the case at the start of the January-February correction, which came with most stocks stretched far to the upside. So the morning damage assessment shows many of the usual prerequisites for a market bounce in place: Strategist Tony Dwyer of Canaccord Genuity – who has been bullish but expecting volatility and waiting for a better tactical entry point – notes that only one-sixth of S&P 500 stocks finished above their 10-day moving average and just 23 percent of index members are above their 50-day average. That fits with the idea of a comprehensive rout in the majority of stocks, which can present lower-risk rebound opportunities. Note that these readings were much more extreme near the low in February – which makes sense because the total index losses were about twice as large then.

What to watch for

The Cboe Volatility Index surged from below 15 Monday to above 21 – surpassing the 20 level that marks the zone when fear is evident in traders' demand for downside option protection. Ideally, it's best to watch for the VIX to spurt to a new high above 20 and then retreat sharply by a few points, closing near lows for the day. That's a clue that the short-term fever might have broken. The CNN Fear-Greed index of investor sentiment finished Wednesday at 8 on a 0-100 scale – showing extreme anxiety, and near levels often associated with short-term market lows. Saying the market is "oversold" doesn't exactly mean it's an "all-clear" signal that the pain is over. Oversold can also represent urgent sellers swamping demand for stocks – and this can sometimes indicate big investors being trapped and forced to liquidate. In fact, crashes – rare as they are and far from likely right now – tend to occur from oversold conditions. Wednesday's air pocket also did not quite represent a reversal of the market's longer-term uptrend – though that advancing pattern since the spring is now being tested. Another thing Wednesday's sell-off was not was a clear expression of alarm over the state of the U.S. economy. Corporate debt markets, which often grow unsettled at signs of economic weakness before equity markets notice – were a bit softer but remain quite solid, as measured by the yield spreads on riskier bonds. For sure, many cyclical sectors such as housing, transportation and even retailers have been in a tailspin. This mostly reflects worry over the duration of this cycle, potential for profit deceleration and long-term disruption by tech innovators than real weakness in employment, consumer spending or business investment. For sure, the backdrop includes the quick jump in Treasury yields, which raises questions about how well the economy can handle higher debt costs as the stimulating effects of the tax cuts abate into 2019 and cost pressures pinch corporate profit margins. But this is not the same as the market sounding a loud warning on an oncoming recession.

So what is the market saying?