What:  We will turn 25% Bearish if the S&P 500 trades below 1134 and 50% Bearish below 1128.

Why:  A statistic being bandied about like a ping-pong ball this weekend was the wondrous performance of Mondays since the March low.  Indeed, it has been the most consistently positive day of the week, by far.  When Monday has gapped up +0.25% or more, then the S&P 500 closed higher than the open nearly 80% of the time by an average of +0.8%.  Not once has it closed more than -0.5% below its open, and only twice out of 19 occurrences has it dipped more than -1% intraday before recovering (this is useful in order to see if we get a change in character).  But from Monday's close through Thursday's, the S&P actually showed a negative return nearly 60% of the time.  So there's that.  We don't really have any "NFP Reversal" pattern in play this week due to the negative payroll surprise, gap down and recovery.  The biggest development is the continued options-market speculation and negative seasonality.  Those are the basis for why we will shift to a bearish bias once (if?) we finally see some price weakness.

What:  We will turn 25% Bearish with a close below 1128.

Why:  In March, we discussed a large number of reasons to expect an imminent rally of one to three months' duration, or perhaps even more.  The rally exceeded all kinds of expectations, and on an intermediate-term time frame we haven't seen too many reasons to expect an imminent end.  Now we have the Dumb Money Confidence at 75%, and the Smart/Dumb Spread at -38%.  Every time we've seen this kind of extreme in the past 15 years, any further short-term strength (over 2-4 weeks) was reversed longer-term (over 1-3 months).  We expect the same this time around, so it's just a matter of waiting to see if and when price action starts to crack.