When SPX dropped below $1200 this morning, I started to take the weakness of the past few days seriously. It traded as low as $1194 before strengthening a bit to close at $1199, off $14. RUT lost $12 to close at $719. The weak market began this morning with concerns that China would raise interest rates to combat inflation; that sent China's markets down and the fear spread across to us. The dollar actually traded down today, but that was ignored by the markets as was the improved consumer sentiment report from the University of Michigan. Trading volume was generally flat; 3.6 billion shares of the S&P 500 stocks traded, which is just above the 50 dma and down slightly from yesterday. Trading volume on the NYSE was up 8%, but was down 17% on NASDAQ. The fact that SPX didn't plunge through $1200 on increased volume is a positive sign, but we'll see what Monday brings. It appears that the sovereign debt worries are taking center stage again. The bullish effects of QE II appear to be forgotten; or one could argue that was already priced in with the early November rise in the markets. In any case, it is a little early to panic; we were overdue for some type of correction. I closed one of my aggressive long trades today (a Dec 310/320 risk reversal on AAPL) but otherwise have left my other long positions as is.

I closed the 770/780 call spreads in my Nov condor since those call spreads were less than two standard deviations OTM; I will allow the put spreads to expire worthless. The Dec condor stands at a P/L of +$320, delta = +$19, and theta = +$106.

Have a great weekend.