* There was a major buying spurt right near the close of trading yesterday, which is more common than it should be on the first day of a new month.  Typically, that has led to a bit more follow-through, then weakness in the days after that.

* The buying pressure wasn't just at the close of course, it was pretty consistent all day.  That led to one of the highest Up Volume ratios in history, and one of the lowest Arms Index readings.  While less reliable nowadays, generally that has been a decent intermediate-term bullish sign when the S&P had been near a month-long low.

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Today's Update:  We will remain Neutral.

hy:  The closing TICK yesterday, according to Bloomberg, was +1295.  That means that nearly 1300 more issues last traded on an uptick versus a downtick at the closing bell.  The last time we saw something like that was way back in April 2009.  Since 1995, a closing TICK greater than +1250 has happened 26 times, and a greater-than-expected 9 of those were on the first trading day of a new month.  If it were any normal day, it would only account for about 5% of the extreme TICK readings, but instead it accounted for 35% of them, so there's likely something to the "first day of the month" thing.  Of those 9 instances, the S&P closed higher over the next 2 days 7 times (averaging +0.5%).  But buying after that second day and holding for the next three days resulted in only 1 gain out of the 9 instances, with an average return of -1.4%.  The buying pressure just wasn't able to sustain itself.  Going back further, I could find no edge either way when a month began with a +2.5% or greater rise in the S&P 500, except perhaps a slight negative bias in the short-term.  Likewise, I could find no pattern in terms of whether additional short-term follow-through was more or less likely to lead to a positive rest of the month.  We're not yet overbought on most measures, and there isn't really any notable resistance until 1100ish, so the favored scenario from here would be 2-3 more days of rallying.  If we became overbought at that resistance level, it should be a tough barrier.  Obviously, the major economic reports today and tomorrow will hold the cards as to whether we get that extra follow-through into Labor Day.

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 and investors clamoring for "fear trade" currencies.  According to our indicators, though, we're not yet at a pessimistic extreme, and given the poor price action we're not eager to add exposure.