The futures were pretty negative about an hour before the open today, but they worked their way up to flat by the open, but the market plunged within a few minutes and worked toward significant lows before starting to rebound. By the end of the day, much of the losses had been recovered. RUT lost $5 to close at $605, but traded as low as $590 before rebounding. SPX had a similar pattern, trading down to $1010 before rebounding to close at $1027 for a loss of $3. Both the SPX and the RUT displayed the classic hammer candlesticks today, a common reversal pattern. However, the lower shadow sets the support level that may be tested several times before a reversal actually unfolds. Tomorrow's unemployment numbers may be the stimulus. Trading volume was up today: up 19% on the NYSE and up 32% on the NASDAQ. The S&P 500 stocks traded 5.5 billion shares, above the 50 dma.

The question on my mind at this point is whether we are still in a correction of a bullish trend, or whether we have started a new bearish market trend. RUT's close today is just below the lower edge of what appeared to be a consolidating range over the past six weeks. With SPX closing below $1040 for two trading sessions, that index has clearly broken out of the consolidating range of $1040 to $1120. However, today's hammer may be establishing a new lower support level for this basing pattern.

The economic news that precipitated this morning's drop was a 30% drop in pending home sales, an increase of 13k in initial unemployment claims, an increase of 43k in continuing unemployment claims, and a weak ISM manufacturing index report. The stage appears to have been set for a disappointing unemployment report tomorrow morning. We may retest those lows set this morning.

I closed half of my Aug 550/560 put spreads for $2.60 this morning and held my Sept 560 puts. This has kept my Aug condor at breakeven since the Sept puts are profiting nicely. In fact my position was actually profitable this morning before the market started rebounding. Now we wait to see how the market reacts to the unemployment report in the morning. Today's rebound on stronger volume was a hint that support has been reached, but the unemployment numbers could cause a selling spree that retests those lows.