The markets traded downward this morning but then recovered and traded choppily up and down the rest of the day until the last hour of trading, when the market sold off strongly and closed at new lows for the day. RUT closed at $641, down $20 after trading as high as $663 this morning. The SPX behaved in a similar pattern, closing down $19 at $1071, after trading as high as $1095 this morning. We are surprisingly close to the intraday "flash crash" low set at $1066 May 6. The most common explanation for the sell-off was the Attorney General's announcement of a criminal investigation into the Gulf oil spill. That certainly should affect energy stocks but it isn't clear to me why that should cause a broad based sell-off in the markets. This is one more example of the extreme nervousness and volatility characteristic of this market. Favorable economic news boosted stocks this morning; construction spending was up 2.7% and the Institute for Supply Management index came in at 59.7 for May, greater than expected by the analysts. Trading volume was essentially flat with a 4% increase on the NYSE and a 3% increase on NASDAQ. The S&P 500 stocks traded 4.2 billion shares, flat from yesterday and below the 50 day moving average.

Our markets strike me as behaving in classic day trader fashion with the frequent late-day sell-offs. Day traders close all of their positions at the end of the day to avoid any overnight risk exposure. In similar fashion, traders may be taking money off the table to avoid any overnight announcements or events from Europe, Israel, North Korea, etc.

My June RUT condor now stands at a P/L of -$2100, delta = -$7 and theta = +$233. So the greeks for this position look good, but the volatility of this market is a constant threat. My July condor actually sits in the black with a P/L of +$380, delta = -$22, theta = +$72. Now we wait to see if this market rebounds or follows through to the downside in the morning.