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

Why:  Since Tuesday's push above resistance, we've had the difficult short-term situation of being in a positive technical environment (due to the breakout) but a negative sentiment one (due to a confluence of extreme overbought/excessive optimism readings).  When we've seen that in the past, typically the S&P settles back over the next 3-5 days or so.  The two exceptions were in March and July 2009 when stocks continued to power higher.  The fact that the S&P has done nothing the past two days is a good sign - in bear markets, readings like we got on the Short-term Indicator Score most often lead to an immediate rollover.  If stocks can add to their recent gains in the coming days, it will augur very well for the intermediate-term.  For the here-and-now, many of our shorter-term guides have dropped back into neutral territory, while a few stragglers remain overbought.  Probably the biggest short-term obstacle right now is seasonality.  Over the past 15 years, the week after June expiry has been positive only 29% of the time, and has been negative each of the past 7 years.  If we would happen to push up into 1140ish in the next couple of days, with another round of overbought readings, then we would probably look to sell short.  For now, though, given the intermediate-term positives we've discussed, I'm still more inclined to sit and wait in the short-term, with neither side particularly enticing.

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.