Markets opened in the red this morning after a punishing day yesterday. SPX opened at yesterday's close and dropped to $1636 but then started bouncing back, recovering most of the early losses by noon and then chopping sideways through the close. SPX closed at $1651, down $5. RUT actually closed the day with a $2 gain at $984. Volatility rose less than a half point to 14.1%. Trading volume fell off from yesterday's highs with 2.6 billion shares of the S&P 500 trading, just above the 50 dma at 2.4B. Trading volume on the NYSE dropped 4% and volume on NASDAQ decreased 16%.

Initial unemployment claims dropped 23k and the number of continuing claims declined 112k to just under three million. The FHFA housing price index rose 1.3% in March compared to February and was up over 7% compared to one year ago. So the data supporting the idea of real estate having hit its bottom and bouncing back continue to come in.

Looking for support levels from the nearly continuous upward trending SPX chart isn't easy. Today's close at $1651 supports the $1650 level touched about three times earlier this month. One may also discern a support level at about $1635 from early May. So the fact that SPX bounced back and held above $1650 may be significant. I will be watching $1650 and then $1635 before pulling the emergency stop cord. Today's bounce back upward on decreased volume supports the premise that this isn't the beginning of the long awaited 5-10% correction. A well defined support level is on the chart at $1600 and a 5% correction would take us through that level to $1586. Another well defined support level exists at $1540 and a 10% correction would take us back to $1503. Today's price action started out looking like it could be the beginning of the correction, but the bounce on lower volume certainly doesn't support that premise.

What yesterday's price action does tell us isn't pleasant: when the Fed does start to "taper" its stimulus, look out below! It will be ugly. But I think traders reflected on Bernanke's words and realized he doesn't have anywhere near the strong economic data he has repeatedly cited as a precursor to ending the Fed's quantitative easing.

This drop in the market has softened the pressure on the call spreads of my June condor on RUT, pushing the call spreads out to about one standard deviation OTM. The position's P/L stands at -$2,660 with delta = -$74 and theta = +$145. We have a long holiday weekend coming up; it will be interesting to see how traders position themselves tomorrow. But we non-directional traders love long weekends.