That is the question as the markets trade downward again today. SPX broke through its 50 day moving average (dma) and lost $10 to close at $1646. RUT lost $11 to close at $1013. Volatility rose almost one point with VIX closing at 15.1%. Trading volume was down from Friday. Trading volume always drops off from expiration Friday, but the trading in the S&P 500 stocks has dropped each day from Thursday of last week; today 1.8 billion shares traded; the 50 dma = 2.2B. Trading volume on the NYSE was down 21% and volume was down 5% on NASDAQ.

SPX broke the support level at the 50 dma today, but it also broke through support at about $1652, set in late June just before the bottom of that pull back was reached. The next solid support level for SPX is around $1610. RUT's chart is equally ugly with RUT decisively breaking through the 50 dma at $1019. The next support level on RUT is around $1000.

There was no economic news to drive the market today, but we have the FOMC minutes from the last meeting being issued Wednesday afternoon. That would be a good time to be on alert for some market volatility. It appears that traders have now concluded that the Fed will announce tapering of the stimulus programs at the September meeting and they are taking money off the table. The last time traders were spooked about tapering, RUT bottomed around $951 (-5%) and SPX bottomed around $1574 (-6%). Alternately, we could look at 5% and 6% pullbacks, respectively, from the early August highs and that gives us $1010 on RUT and $1607 on SPX. That analysis takes us quite a bit lower on SPX, but RUT is very close at today's close of $1013.

Fortunately, my put spreads in the Sept position are still relatively far OTM at 930/940. The position stands at a net gain of 7% with delta = +$38 and theta = +$64. I think it is reasonable to assume we won't continue to drop until September 18 when the FOMC announcement comes out and Bernanke holds his press conference. So the question is, where is the equilibrium point where traders are comfortable and willing to tread water in advance of the announcement?