The S&P 500 is sitting right at the trendline that extends from the March lows, and is also right at the 20DMA, which is a reasonable place to be after drifting above that moving average for the past couple weeks. Market internals suggest that this pullback may be about finished, providing a setup for some further upside; breadth and on balance volume improved on Friday. At the same time, options sentiment is still bearish, and a few technical indicators (CCI, for one) flashed sell signals on Friday.

1395/1400 remains the key area on the S&P, 13100 is the level to watch on the Dow, and the Nasdaq needs to break above 2000 to keep the bullish thesis intact. We’re looking for a retest of the March lows sometime this summer.

We posted a bit more than normal last week, so make sure you didn’t miss any of these:

• Calendar Options: Five Things You Need to Know About Calendar Spreads
• Introducing Calendar Options
• How Vega Can Deceive You: Part I
• How Vega Can Deceive You: Part II
• Bonus Trade Review: Calendar Spreads – Plus, The Importance of Risk Management

Reversal Readings

DIA – 2.74
SPY – 7.04
XLF – Financials – 4.14
XLV – Healthcare – 0.78
IYR – Real Estate – 3.09
RTH – Retail – 0.44
XLY – Consumer Discr – 8.44
DBA – Agriculture – 99.16
DBC – Commodities – 99.84
IYT – Transportation – 8.82

Last 5 posts by Condor Options

• Midweek Sméagol Reading - August 20th, 2008
• More on The Correlation Game - August 18th, 2008
• August Monthly Review - August 17th, 2008
• They Have the Passports to Prove It - August 13th, 2008
• Sleepy Nasdaq - August 12th, 2008