* While many disparage Friday afternoon reversals, historically they're not so rare as to be completely dismissed.

* Reversal bars like we saw last week, however, have a poor history of marking exact low points - usually there was a lower close sooner rather than later.

* Small options traders have picked up their interest in protective puts, but it's still not to a level that we've seen near prior lows.

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What:  We will remain neutral for now.

Why:  On Friday, we were looking to switch to a minor bullish position if the S&P suffered a substantial drop and started to recover.  It didn't quite get to the target area, though, and the afternoon reversal wasn't all the impressive in terms of recovering the prior days' losses.  Historically those types of reversals have a poor record at pinpointing major turning points (see below).  While we have an increasing number of extremes among our indicators, given the price action and the studies we've looked at recently, we won't be looking to turn bullish from here unless we get another whack lower in the days ahead, or price action recovers to a point where it's more evident the uptrend is likely to resume.

The S&P 500 e-mini futures are trading down 3 points at 1057 as this is sent.

Bearish Inputs 

* Nothing notable.

Bullish Inputs

* Nothing notable.

What:  We will remain Neutral for now.

Why:  On January 8th, the Dumb Money Confidence hit 75%, and nearly every time we've seen that 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).  Now that that's happened again, we're getting conflicting studies about whether the price action over the past two weeks is a sign of a larger trend change.  We don't have an overwhelming number of signs that we have seen a major market peak, and several sentiment measures have turned very quickly from where they were a couple of weeks ago.  The quick failure of the recent multi-month low and double 1% up days, as we discussed last week, could actually turn out to be a multi-week positive (as ironic as that sounds), and we'll be watching the next several sessions closely for the possibility of a washout type of bottom.

Bearish Inputs 

* Newsletter bears lowest in 22 years earlier this month.

* Surge in speculative options activity earlier this month.

Bullish Inputs 

* Uptrends across the board.

* An increasing number of indicators are turning bullish (for the market).