What:  If the S&P 500 cash index trades above 1105, then falls below 1098, we will move to 25% Bearish.  We would then turn back to Neutral with a trade back above that previous intraday high.

Why:  Yesterday I mentioned the "sloppy bottom" pattern that we seemed to be carving out, and the mix of short-term sentiment readings we were seeing.  Yesterday's jump moved us closer to overbought, especially in sensitive indicators like the NYSE Cumulative TICK, and that's pushed the STEM.MR Models well into "excessive optimism" range.  The market has had difficult maintaining its upside momentum when the models are this overbought, but the one consistent exception to that is when we are emerging out of extremely oversold conditions.  Given the Intermediate-term Score from Monday's Report, I suppose that argument could be made.  Either way, as we discuss below, short-term follow-through should be key.  I'm expecting that the layered resistance from 1100-1110 will hold and we'll see a test of the recent lows, but if we continue to power higher then there will be compelling precedents suggesting even more upside.

What:  We will remain Neutral for now.

Why:  On January 8th, the Dumb Money Confidence hit 75%, and nearly every time we've seen that 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).  Now that that's happened again, we're getting conflicting studies about whether the price action over the past two weeks is a sign of a larger trend change.  We don't have an overwhelming number of signs that we have seen a major market peak, and several sentiment measures have turned very quickly from where they were a couple of weeks ago.  Given the recent multi-month low and double 1% up days, how the S&P performs in the short-term should give us a good clue as to whether we've already likely seen another lasting bottom, per the study discussed in today's Report.