What:  We will remain neutral for now.

Why:  The S&P 500 is lower than it was on Friday, despite a huge spike in the Short-term Indicator Score.  That's troubling, since markets that do no rally well from short-term oversold conditions usually have more selling ahead.  There have been 22 times the S&P was lower four days after the Score crossed 70%, and a week after that it was lower 60% of the time.  Interestingly, though, there were only 3 times when that happened after a Score of 80% or higher (like we saw on Friday).  Those were 9/21/01, 3/5/07 and 10/15/08, each of which marked at least a short-term bottom.  That extra few days of selling after such a truly extreme Score was the final "puke" stage of the decline.  If we're seeing that here, then yesterday's lows should not be violated on a closing basis.  On a technical basis the current levels really need to hold, and as long as they do we still have the chance for a decent snap-back rally.  For now, though, we're going to stand aside and see how the market treats the GDP number.

What:  We will turn Neutral if the S&P 500 closes above 1117.

Why:  In March, we discussed a large number of reasons to expect an imminent rally of one to three months' duration, or perhaps even more.  The rally exceeded all expectations.  On January 8th, the Dumb Money Confidence hit 75%, and every time we've seen this 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).  We expected the same this time around, so it was a matter of waiting for price action to crack a little.  We're getting some conflicting studies about whether the price action last week is a sign of a larger trend change, so more than anything we want to see how any bounce from short-term oversold conditions plays out.  A bounce, then move under December's low (around 1090) will bring the intermediate-term trend into question.  We got that this week.