Part of my morning routine is checking the S&P futures to get a sense of the day's markets before the open. But those positive futures were very misleading today. Within a few minutes of the open, the selling began and it continued all day. I expected a little bit of recovery into the close, but it didn't happen. SPX closed down $41 (2.3%) to $1742 and RUT fared even worse, losing 3.2% or $36 to close at $1095. We must back track to June 20th of last year to find another $40+ down day on SPX. As expected, VIX spiked up over three points to 21.4%. Trading volume rose with 3.3 billion shares of the S&P 500 changing hands; trading volume rose 9% on the NYSE and increased 12% on NASDAQ.

What started this rush for the exits? That is always hard to precisely determine. Every guru on CNBC is very certain of his answer, but I have my doubts. The China PMI came in lower for January at 50.5, but that was only down from 51 in December; and this report was out before the market opened, so we should have seen its effects in the futures. The ISM manufacturing index declined to 51.3 for January from 56.5. Construction spending declined 0.1% in December, down from an 0.8% increase in November. The sharp market decline began about 20 minutes before the ISM report and just accelerated from there. As is often the case, it appeared that the impetus to tip this market over the edge didn't have to be a huge event.

SPX sliced through the strong support level at $1773 this morning and did not hesitate to continue lower to break support at $1748. The next possible support level is $1730, set by the mid-September peak last year. Even more bearishly, SPX closed at $1742, just above the lows of the day at $1740. There was no "buy the dip" rally late in this trading day. RUT's close at $1095 is just above the October 1st high of $1088. With today's close, SPX is now almost 6% off of its highs this year. RUT is down 7.4%.

I decided to take advantage of this huge down day and close my RUT Feb 1210/1220 call spreads for $0.10. That closed the February iron condor spread for a net gain of $960 or +7%. That brings our portfolio performance for 2014 to roughly break-even (-0.3%), as compared to the S&P 500, down 5.7%. It is nice to be beating the S&P 500 again; I couldn't seem to manage that last year.