What:  We will move to neutral if the S&P 500 cash index trades at 1163 or 1110.

Why:  Yesterday I mentioned that I've been looking for a move down to 1115-1120 as the most likely target for a "retest" of the panic lows.  While the pre-market futures on Monday dipped to 1120, a more "pure" closing of the huge price gap from May 10th would only occur during regular trading hours.  The S&P managed to kiss that 1115 level almost exactly before rebounding strongly into the close.  That creates a dilemma - it clearly hit the target price to be considered a re-test of the panic low, but it just missed closing that price gap.  Maybe we're just splitting hairs and what we got was close enough.  Technically, the gap is still open and historically is most likely to close, but I don't want to become obsessed over something that missed by only a few points.  Yesterday's reversal bar seemed impressive, and historically when we get a day like that (a gap up, then a 1% or larger decline to a multi-day low, then a big enough rebound to close in positive territory) we see higher prices over the next 1-2 days, though the edge isn't terribly great and it doesn't last any longer than 2 days.  I still see no reason just yet to change the outlook from a range-bound market (1110-1180), though given yesterday's (kinda-sorta?) successful re-test of the panic lows and the multiple positive intermediate-term studies we've looked at lately, I don't want to be aggressively short on even a short-term time frame here.

What:  We will remain Neutral for now.

Why:  On April 15th, the Dumb Money pushed up to 75%, and the spread between that and the Smart Money reached to -45%.  In addition, we got a tremendous surge in the number of bearish (for the market) Indicators At Extremes.  That's the kind of development that doesn't necessarily indicate an imminent market peak, but it does almost always mean that any further short-term gains will be erased.  Now that that has happened, and volatility has exploded higher, we have a very unusual situation with the "shock day" on May 6th.  We looked at somewhat similar days on May 7th, and the conclusions were clear - a short-term rally was likely, probably being capped at a 62% retracement of the crash, then a re-test of the panic lows.  We possibly got that re-test on May 17th with the S&P dropping below 1115.  It didn't quite close the gap created when the market gapped up on May 10th , which is a thorn in the side of the re-test idea (all previous gaps of +4% or more have been closed at some point).  We've looked at quite a few intermediate-term bullish studies over the past week, but continue to feel that for now we will most likely see more back-and-forth trading before a sustained multi-week bottom is in place.  Given historical post-crash precedents, we shouldn't see much activity below 1110 or so, or above 1180ish, and would look for prices to bounce within that range for now.