Bottom line - Short-term Outlook:   Neutral  (since June 3, SPX 924)

Bottom line - Intermediate-term Outlook:  Neutral  (since April 9, SPX 843)

Still Looking Fairly Positive The Rest Of The Week, Unless...

06/16/09 3:45 PM EST

The indices have sold off a bit today, but they've been trying to reverse a bit of the damage over the past hour.

The selling over the past two days has generated a few oversold signals.  The table below is from the Signpost section, and it gives a snippet of detail about the kinds of studies we normally discuss in the morning comment.  Many of you have asked for more of a heads-up about what kinds of things might be triggering, so here goes.

Obviously, since the market's not closed yet and we've often seen wicked moves in the last half-hour, some of these setups can be nullified by the close, so just assume that anything in the table is a "what-if" if we closed about where we are now.

SHORT-TERM (USUALLY LOOKING AT THE NEXT 1-5 DAYS)
BULL / BEAR	SIGNPOST	% POSITIVE, #, PROFIT FACTOR	TIME FRAME	NOTES
	RSI(2)<10 for 2 days, today < yesterday	64%, 133, 1.7	2 days	A little less effective during bear mkt
	Down 1% 2 days in a row	60%, 164, 1.7	3 days
	...on a Tuesday	70%, 20, 2.2	3 days
	Monday and Tuesday of expiration week both down	71%, 41, 2.4	3 days
	McClellan Oscillator (ratio-adjusted) less than -70	74%, 127, 2.3	3 days
% Positive:  the percentage of time the S&P was higher the given number of days later #:  the number of occurrences in the study Profit Factor:  using long trades only, this is the gross profit made from winning trades divided by the gross loss from losing trades (anything above 1.0 suggests an upside edge, and the bigger the better)

The skew among the studies that are triggering today is pretty positive, with a 2- to 3-day return in the futures that was positive between 60%-75% of the time.  Especially notable is the oversold McClellan Oscillator and the double down days early in an option expiration week.

We're also seeing the Equity-only Put/Call Ratio spike to about 0.82 as of the latest reading, which is the highest since the March low.  This particular indicator has done a good job at pinpointing short-term extremes over the past few months, so there's that too.

On the negative side, the S&P wasn't able to hold 920, and it also wasn't able to stage much of a bounce off the oversold STEM.MR Model reading from yesterday afternoon.  The reason this is troubling is that a market that cannot rally off of short-term oversold support is very often undergoing a larger trend change (in this case, from up to neutral at best).

The next support area I'm watching is around 905-908, and we didn't quite make it there this afternoon.  As I type, the S&P is bouncing a bit to 917.  Given the studies above, I'd be looking for possible buying interest if we happen to trade down into that support zone into the close or tomorrow morning.