It is a slow news week, but traders are gearing up for tomorrow's G-8 meeting and the upcoming earnings season. We will hear from Alcoa and Pepsi Bottling tomorrow but it is next week that traders are looking forward to.

Don't forget that the historical tendency for earnings season suggests that stocks outperform before and suffer from disappointment after the fact. This is similar to a buy the rumor, sell the fact type of scenario that often plays out in markets. However, it seems as though some of the selling has come early this time around and the price pressure may not over yet.

Crude oil dropped for the fifth consecutive day and seems to be dragging equities down with it. Nonetheless, it is difficult to see if the dog is wagging the tail or the tail wagging the dog. In both cases, we are approaching oversold conditions but this is more true of crude than equities. While our models are pointing toward the potential for a bounce from here, we still think moderately lower before this can happen. We have been calling for the mid-to low 70's in the S&P and despite today's valiant attempt at reaching our target, we feel like there is a bit more downside and will continue to look for such levels. Our clients were recommended to sell the August 760 puts for about $6.50 in late day trade.

If you are trading the Russell or the NASDAQ, we are still looking for 468 and 1390 in the September contracts. Because the NASDAQ was the strongest on the way up, it could be the hardest hit on the way down. We would refrain from overly bullish holdings in this market. However, aggressive Russell traders may look to put on bullish positions at or near our noted target.