The markets opened upward early this morning, seemingly in response to the extreme downturn on Friday. But within minutes the traders began selling off strongly. Then the markets recovered slowly through the rest of the day and all of the major indexes closed modestly higher on the day. RUT closed up $3 at $613 while the SPX closed at $1071, up $6 on the day. Trading volume fell off markedly; it decreased by 34% on the NYSE and 18% on NASDAQ. Trading in the S&P 500 stocks dropped to about 3.5 billion shares from almost 5 billion shares traded Friday. Volatility dropped today with the VIX closing at less than 26%.

IBM announced earnings after the close and beat its earnings estimates handily, but came in about 2% under estimates for revenues; in after hours trading IBM is trading down about $5/share - is this a signal for tomorrow's market? This market is in an extremely defensive posture - it sells first and asks questions later.

Our Aug RUT iron condor is developing nicely with a P/L of -$1050, position delta = -$10 and position theta = +$118. If you draw trend lines on the SPX chart since late April, we have a channel from about $1000 to $1100 where the SPX bounced off of $1100 last week and may now make its way down to the lower part of this channel around $1020-$1030 over the next several sessions; the disappointment in IBM's revenues may be the impetus for a move in that direction tomorrow. But we will continue to manage our condor on the basis of the market's current move, not what we predict for its future direction.