Today's Update:  We will remain Neutral.

Why:  A lot of folks like to point to seasonality this time of year, with the common refrain that September is the worst month of the year for stocks on average.  While true historically, it has not been very consistent over the past 15 years or so (September has shown a positive return 9 of the last 15 Septembers).  The beginning of the month has been more of a crapshoot than anything, and the same goes for the very end of August.  If we're really trying to find something, then there is a modest bullish bias ahead of the Labor Day holiday, and  if the market does end a month with heavy selling pressure, then the next few days tend to see a rebound about 70% of the time.  There is no doubt we've seen some heavy selling and extreme breadth days lately (see below).  What's odd is that we saw Up Volume of only 11% yesterday, yet the S&P didn't even violate the prior day's low.  The only other instance I can find in the history of the S&P futures is 3/2/07 (the S&P sold off one more day then rebounded).  So while yesterday put a big damper on things, I'm still expecting a generally rising market for this week.  The daily release of important economic data will have a big say this week, though, and I will have no interest in longs if the S&P is under 1040.

Current S&P futures:  -3 points at 1042

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Sentiment ():  Mostly neutral

Trend ():  Stuck in a trading range

Support/Resistance ():  1040/1100

Other ():  Nothing notable

Today's Update:  We will remain Neutral.

Why:  During the market's breakdown in early July, we saw a number of examples of excessive pessimism, such as deeply oversold conditions, and give-up among Rydex traders and individual investors.  After sentiment recovered from that during a 10% rally, we saw some encouraging signs, such as the advance/decline line making a new all-time high.  But indexes like the S&P 500 remained mired in a pattern of lower highs and lower lows, so price action was dubious.  Since then, we saw some worrisome signs, some of which the media has grabbed onto, like the Hindenburg Omen.  Now stocks are threatening to break down under support.  There is anecdotal evidence of too much pessimism once again (mainstream press about mutual fund flows into bonds instead of stocks, firms rolling out "fat tail" funds, and celebrities warning about pending market crashes and advising the masses to stay away from stocks).  Lately, some of our indicators have started to reflect that, including a dearth of money in leveraged long funds at Rydex and investors clamoring for "fear trade" currencies.  According to our indicators, though, we're not yet at a pessimistic extreme, and given the poor price action we're not eager to add exposure.

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Sentiment ():  Mostly neutral

Trend ():  Mixed int-term trend

Support/Resistance ():  1040/1140