Traders pondered the question all weekend: is this the low of the correction or do we have more to go? A related question might be whether a new global recession is on the horizon, led by Europe's sovereign debt problems. SPX broke below the 200 dma Friday and really spooked the markets in the process. SPX opened up in the black this morning, but quickly turned south. But an afternoon rally brought the market back to close at $1278, up less than a dollar. RUT behaved similarly, closing flat at $737. The SPX candlestick today was the classic doji, but with a longer shadow to the downside. This principally an indicator of balanced trading between the bulls and bears, but the lower shadow holds out some hope that the bottom of this correction is being tested. The purists will quibble whether this candlestick should be termed a hammer; the bottom line is that the market traded downward very strongly this morning, but then the bulls showed up and started buying - a positive sign, but not definitive. Trading volume was down from Friday at three billion shares of the S&P 500, but still above the 50 dma. Trading on the NYSE was down 15% and trading volume was down 12% on NASDAQ.

Some news over the weekend could be interpreted as positive for the European debt issues, but the fact remains that the debt problems in Europe are much as they are here. No politician has the courage to touch them. But the markets are largely about perception and if European leaders appear to be saying the right things, the market may stabilize here.

My June iron condor on RUT is hedged with Jul 700 puts and stands at a net loss of $710 with delta = +$38 and theta = +$151. My July condor at 610/620 and 850/860 is up $700 with delta = +$8 and theta = +59. If RUT stabilizes here, the June position should be fine; in that case, our two sigma rule will likely close the put spreads on Friday. The July position is almost perfectly delta neutral; I built in a little extra safety margin to the downside and that has proven helpful.

Enter your bets in the office pool for the SPX low...