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

Why:  Yesterday's push above widely-watched resistance triggered a number of overbought extremes, and gave us yet another 90% Up Volume day (see below).  Among the shorter-term guides we follow, there were some significant extremes, which pushed the Short-term Indicator Score to its most-stretched level in two months.  It has matched this extreme 9 other times in the past five years (all of them occurring after 2007), after 7 of which the S&P declined during the next 3-5 days.  The two exceptions were 3/12/09 and 7/15/09, after which the S&P kept powering higher.  The failure of the market to decline after a severe short-term overbought reading is very often an excellent tip-off that there will be more gains in the intermediate-term, since the buying pressure is so intense.  We should watch for the same here - if the market continues to climb over the next week, the probability that we're in for yet more gains is high.  If we drop back, then it doesn't necessarily put a cap on our intermediate-term prospects, but does make it less compelling.  While the studies we looked at over the past month were quite bullish, I think it's unlikely we'll get another push like we saw in March or July 2009, so I expect some short-term backing-and-filling into next week without much directional movement overall.  If we drop right back under 1105, the uptrend will become suspicious again, but for now I'm still ultimately looking for a move into 1140-1150 due to the studies we've discussed previously.

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.