Summer Doldrums? Watch the 1530 area in the S&P.

I stated yesterday that the market would most likely experience a short-term reprieve over the next few trading days and that came to fruition today. When all of our benchmarks (including Oil (OIH) and Gold (GLD)) are in an overbought state the likelihood of a sustained move to the upside is low. Unfortunately, we did not get the signal necessary to place a trade in our ETF Extremes strategy. We were extremely close, but remained discipline. Our approach has led to 13 out of 14 successful trades and a cumulative return that exceeds 215% (add the individual trade return on our performance page). Obviously, there are no complaints here with that type of overall performance.

A signal does look imminent over the next few weeks, but as always we will not force the action. We always wait for the market to come to us. That is the one of the keys to success in trading/investing.

Now that the market has experienced the short-term sell-off it will be imperative that we watch the 1530 area of the S&P (SPX). Bullish or bearish, whichever direction the market decides to move over the next few days could be telling over the intermediate-term.

I still think the old adage “sell in May and go away” applies to this summer’s performance. If indeed we are correct our SPX Short Iron Condor strategy will be the beneficiary.

Overbought/Oversold levels for June 5, 2007

• SPY -  59.6 (neutral)
• DIA - 56.1 (neutral)
• IWM - 67.3 (neutral)
• QQQQ - 75.1 (overbought)
• GLD -  65.7 (neutral)
• OIH - 68.4 (neutral)

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