Today's Update:  We will remain Neutral.

Why:  The past couple of days didn't resolve much of anything from a technical or sentiment perspective, as we saw gaps down and then intraday recoveries both days, neither of which was able to shake us out of the trading range.  That activity has lessened the short-term overbought indicators we entered the week with, and most of our guides at this point are neutral (in the short-term).  We do have option expiration today, which has had a decidedly negative bent in the days following.  The last 7 times the S&P futures gapped up at least +0.25% on September expiration, it was negative through Monday's close.  Forgetting about September for a minute, if the futures gapped up that amount to a one-month high on any expiration morning, they were negative through Monday the last 11 times.  From the close of September expiration through Monday's close, the futures were positive only 4 out of 20 times since 1990, and 5 out of 20 times through Wednesday's close.  It goes back to what we looked at earlier this week about the worst seasonality of the worst month right around this time.  Seasonality is nothing more than a mild breeze for or against the market, and right now it's blowing against.  Still, should the S&P managed to gap to a new high and then hit a higher intraday high after the first hour, the probability of a downside reversal later in the day decline substantially, particularly if the opening gap is larger than +0.5% or so (it was earlier this morning, but has faded since).

Current S&P futures:  +4 points at 1126

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Sentiment ():  Neutral

Trend ():  Stuck in a trading range

Support/Resistance ():  1040/1130

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, investors clamoring for "fear trade" currencies and individual investors dropping to near multi-year lows of bullishness.  A breakout, and hold, of the recent range would give more confidence to the idea that that pessimism will once again be ill rewarded.

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Sentiment ():  Mostly neutral

Trend ():  Mixed int-term trend

Support/Resistance ():  1040/1130