Today's Update:  We will remain Neutral for now.

Why:  Yesterday was pretty much a do-nothing day in the major equity averages, which should probably be considered a win for the bulls, given the extreme nature of several of our short-term indicators.  Yesterday we touched on the Short-term Indicator Score, which had reached a point of maximum overboughtedness (is that a word?).  When it hit that kind of extreme in the past few years, the S&P dropped 7 out of 9 times during the next 3-5 days...but the two times it didn't, it preceded excellent intermediate-term rallies.  Since we saw so many signs of excessive pessimism in May, it's possible we're heading into a somewhat similar situation now, and that argument would be bolstered considerably if stocks can manage to continue to rise over the next week or so in spite of the extreme short-term overbought indicators.  That kind of eager buying pressure is very often an excellent tip that more gains are to come in the weeks ahead.  For the short-term, though, the S&P managed to hold that 1105 level (which is good) but it remains overbought (which is bad).  I'm still looking for a move into 1140-1150, but not willing to try to chase a short-term move given the extreme indicator readings.

Today's Update:  We will move back to Neutral if the S&P 500 cash index trades below 1065.

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.  After we got the expected weakness and volatility exploded higher, we experienced 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.   Since late May, we've looked at quite a few  bullish intermediate-term studies - we got a major surge in pessimism, then several positive breadth thrusts and positive price performance, all in the context of an ongoing bull market.  That has led to consistent and significant gains when looking over the next 2 weeks to 1 month.  However, June 4th's Payroll Report kneecapped the nascent rally attempt and took us to a new closing low.  That is very unusual given the studies we discussed and cannot be dismissed.  But since we have seen a lot of give-up among Rydex traders and small options traders, and the S&P made another go at a breakout above resistance, we're willing to give the bullish outlook another shot.