The markets took another leg down today with the S&P 500 dropping $33 to $2002, just above the 50 dma and below the high set back in September. SPX also closed at its low for the day. A close below the 50 dma on Monday will be significant. RUT behaved even more bearishly, gapping open lower and closing at its low for the day, down $15 at $1152. Trading volume spiked higher with 2.4 billion shares of the S&P 500 trading today. Trading increased 13% on the NYSE, but only increased 3% on NASDAQ. Closing at the lows and trading in higher volume are two strong signs of a serious trend, in this case, a bearish trend. On the other hand, a look at the price chart confirms strong support around $2000 on the S&P 500, so there is a good chance we will see it bounce next week.

It was easy to hear the talking heads today blaming market woes on the falling price of oil. To my mind, this is more grasping at straws to explain market behavior. Unless you happen to be in the oil business, lower oil prices are good for most industrial sectors and certainly put more money in consumers' pockets. Market analysts of all stripes have been telling us the market had gotten ahead of itself for some time. It was time for a breather.

But that doesn't explain this market behavior. Price volatility has been extreme for most of the past two years; we have experienced sudden and severe pull backs, followed by vertical ascents to take us right back where we started in short order - how does that make any sense? Did the economy collapse and rebound in just a few trading sessions? Take the last plunge for an example. SPX dropped $192 or 9.5% in 19 trading sessions (9/19 to 10/15). It only required 12 sessions to bounce back and fully recover that loss, and in fact, climbed even higher from there. I'm not naive. I know many emotional and political factors influence the markets, but fundamentally, we expect basic economics to ultimately drive the capital markets. Stockholders want a return on their investment and they project cash flow to analyze those prospects. How does this make any sense?

In any case, this drop was helpful for my SPX December iron condor, taking the pressure off the remaining 2080/2090 call spreads (rolled half to 2100/2110), but less helpful for the 1840/1850 puts spreads in my SPX January condor. We have a big weekend ahead of us with our Christmas party tomorrow evening. If you are in the Chicago area, you're invited! Drop me an email for the address.