What:  We will remain neutral for now.

Why:  Yesterday I mentioned the that the day before President's Day has been almost unrelentingly bearish for the past 17 years, and it looks like that's going to continue.  For what it's worth, there were only three years where this day gapped open -0.5% or worse (02/12/99, 02/16/01 and 02/18/09).  From those opens until two days later, the S&P's returns were -1.9%, -3.6% and -6.2%, so some additional downside follow-through each time.  I was looking yesterday for a rally towards resistance, accompanied by short-term overbought conditions, for a possible short trade heading into the weekend.  We got a couple of the overbought readings (Down Pressure and Cumulative TICK in the NDX), but didn't quite make it to the resistance levels I mentioned.  With the selling pressure already this morning, I'm not as interested in selling if we happen to make up the morning loss and rally again.

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.  The quick failure of the recent multi-month low and double 1% up days, as we discussed last week, could actually turn out to be a multi-week positive (as ironic as that sounds).  Last week's late reversal took some air out of that argument, so right now we're waiting to see if the market responds positively to a scattering of oversold intermediate-term indicators, or if we get another thrust lower that could set up a higher-probability multi-week low.