The markets started out weakly this morning, largely on disappointing earnings and a weak outlook from Bank of America. But the selling accelerated, leading to broad losses across the board. SPX shed $23 to close at $1552 while RUT closed down $17 at $907. Of course, many of the gurus on CNBC are shouting "I told you so", but the behavior of this market defies most rational analysis in my opinion. Many were pointing to BAC's earnings, but the Fed's Beige Book appears to have been largely ignored. In short, the Fed gave the economy its best rating in several years, saying they see many signs of the economy overcoming its problems. At first, I thought traders might see those comments as a prelude to reduced FOMC stimulus and sell the market. But markets hit their low of the day before the Fed release of the minutes and just traded sideways afterwards. That takes us back to BAC's earnings as the explanation for the weakness, but many of the corporate leaders announcing earnings so far in this cycle have been beating estimates, so it is hard to say why today's trading was so weak. More importantly, why are the markets  oscillating back and forth so wildly?

SPX traded down to the 50 dma and then bounced, closing right where it closed Monday. While Monday's and today's markets were spooky events, this market is not in free fall, so ignore the "sky is falling" crowd (at least for now). But if we break down through $1540, things could get ugly. Interestingly, RUT also closed today at the closing price from Monday, after exploring lower prices. In RUT's case, the break below $895 is the panic zone.

I hedged my May condor position today, just in case the market breaks down further tomorrow. I bought the June 850 puts for $14.70. The May position stands at break-even with position delta = +$14 and position theta = +$8.

Predicting market direction is never easy, but this particular market is particularly daunting. So we wait and see.