What:  We will move to Neutral with a reading above 1106 in the S&P 500 cash index.  Or, we will move to 25% Bullish on a drop to 1085 or below that then reverses up more than 5 points, and subsequently move back to Neutral if that low is violated by more than 3 points.

Why:  This is only the 6th time the Short-term Indicator Score exceeded 80% one day and 65% the next.  What's unusual is that they were clustered during the most volatile periods of the past decade (9/18/01, 9/21/01, 10/8/08, 10/10/08 and 11/21/08).  When we just look at times the Score was >65% and then the S&P gaps -0.5% or more the next morning, by three days later it was up 80% of the time (30 occurrences).  When the S&P gapped that much the day before a FOMC meeting, by the close of meeting day it was up 70% of the time.  So a few measures here suggesting that the pre-market move to 1080 should hold, or not be violated on anything other than a one- or two-day basis...unless we're in the midst of a waterfall type of decline.

What:  We will turn Neutral if the S&P 500 closes above 1151.

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 expectations.  On January 8th, the Dumb Money Confidence hit 75%, and 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 was a matter of waiting for price action to crack a little.  We're getting some conflicting studies about whether the price action the past few days is a sign of a larger trend change, so more than anything we want to see how any bounce from short-term oversold conditions plays out.  A bounce, then move under December's low (around 1090) will bring the intermediate-term trend into question.