Yesterday's soft market became ugly this afternoon. It appeared that the more traders considered the Fed announcement, the more they decided to sell. SPX closed down $15 at $1583, but RUT really tanked with a drop of $23 to $924. Trading volume actually dropped from yesterday with 2.4 billion shares of the S&P 500 trading. Trading on the NYSE dropped 7% and volume on NASDAQ dropped 5%. Volatility rose one point to 14.5%, so traders weren't spooked; if we had seen a spike in volatility plus high trading volume, that would have been more worrisome.

There wasn't anything notable in the FOMC announcement: fed rates remain unchanged and QE will continue until either unemployment drops below 6.5% or inflation exceeds 2.5%. There was a change in language in that the Fed may "increase or reduce" the amount of quantitative easing as it sees necessary. Those who oppose the Fed's involvement thus far weren't happy with that phrase, but I doubt that affected the market. Maybe the economic data released earlier in the day was unsettling as traders look forward to the jobs report Friday. ADP reported an increase of 119k jobs but analysts expected 155k. The ISM index dropped from 51.3 to 50.7, not significant, but in the wrong direction. And construction spending contracted by 1.7% in March in contrast with February's 1.5% increase.

RUT sliced right through the 50 dma to return to the middle of the recent trading range, whereas the drop in SPX was much more modest, remaining high above the bottom of the trading range at $1540. All in all, I am less concerned since the volatility didn't spike and trading volume was relatively low - but I am glad I bought puts for my stock portfolio on Monday. Perhaps all of this market weakness is setting up for the jobs report Friday. If I am trying to remove risk from my portfolio, selling the small and mid-caps first makes sense, i.e., a larger drop in RUT.

Today's drop didn't affect my May iron condor position much; the P/L stands at a gain of $1,000 (+6%) with position delta = +$28 and position theta = +$90. I suspect we won't see much of a move either way tomorrow, as we anticipate the jobs report Friday.