In a note yesterday morning to members, we were looking for an oversold rally, and said rally still has yet to materialize in any big way.  We still think the S&P will close the week closer to 1300 than to 1250, but that’s a conviction loosely held.

The two biggest questions on our minds for the remainder of the week are:

1. Will the financials stop dragging everybody down?  $BIX, $BKX, XLF all had a good day today, but they need to hold these levels.
2. Will the Nasdaq leadership resume?  NDX, AAPL, RIMM all had a positive close, but some follow-through will be crucial.

Some items worth perusing tonight:

• Brett Steenbarger on using the relative strength of XLY vs SPY as a gauge of investor sentiment.
• Bespoke tracks the relationship between high yield credit spreads and the S&P.  If the widening of these spreads is really a lagging indicator, maybe we still have some upside to go in equities.
• MarketSci expands on the notion that the SOX (semiconductors) is a fantastic one-day leading indicator for the S&P 500.  Fascinating stuff.
• Felix Salmon reviews a long piece to appear in this weekend’s New York Times Magazine on Obama’s economic policy.  A quick skim suggests this will be very interesting reading for anyone who cares more about getting economic policy right than about continuing our regime of socialism for the rich.  Highlights of the highlights:
  

  What’s abundantly clear from the article is that Obama has a thinking man’s economic policy: empirical, post-ideological, pragmatic. Yes, he does have an unfortunate fondness for ethanol subsidies, which comes from a combination of his Midwestern roots and the primary electoral calendar. But beyond that, he has Bill’s, rather than Hillary’s, openness to new ideas and focus on ends rather than means. And more to the point, he’s interested in this stuff….[something] you simply can’t imagine reading about either George W. Bush or John McCain. [link]

• Should the same article be reviewed on the WSJ editorial page, it would go something like this: “…sssss….trickle down…sssss…my preciousss…..taxses cutses, we wants it…sssss….”

Last 5 posts by Condor Options

• 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
• Market Neutral, Not Delta Neutral - August 12th, 2008