The equity markets in this country behaved as though that was the headline this morning, as all of the major indexes plunged at the open. SPX traded as low as $1261 before recovering to close at $1282, down $15 on the day. RUT lost $7 to close at $791. The $1260-$1261 support level was established back in late December; today's action reaffirmed that support level. Volatility (VIX) jumped 3 points to close at 24%. Japan's Nikkei closed at a new 52 week low, but that is more understandable. Why did our markets drop so severely? I think the answer is the same reason we have seen such volatility in the markets since 2008 - fear. Today's FOMC report once again reaffirmed the growing body of data supporting a slow, but solid, economic recovery. But the fear remains because we see neighbors out of work and unable to sell their houses. We watch a dysfunctional government continuing to play politics with our country's future. The generally positive corporate earnings announcements appear in stark contrast to what we see everyday.

Trading volume was up strongly today with over 4.3 billion shares of the S&P 500 changing hands; trading was up 33% on the NYSE and also up 33% on NASDAQ. Strong trading volume on a down market day could be considered bearish. But look at a minute chart of the SPX; from about 10 am this morning, the market simply climbed upward, and that climb occurred on a big spike up in volume; that strikes me as pretty bullish.

The Fed reaffirmed QE II and the New York Fed's Empire Manufacturing Survey reported out at 17.5 for March, up from 15.4 last month. The National Association of Home Builders (NAHB) Housing Index came in at 17 for March, up 6%. So the indicators for our economy continue to point upward, but the fear remains.

The spreads of my March iron condor on RUT continue to cruise toward expiring worthless. The call spreads are over five standard deviations OTM while the put spreads are over three standard deviations OTM. The P/L stands at +$3,740 with delta = +$36 and theta = +$291. The Apr condor on RUT at 700/710 and 900/910 stands at a P/L of -$280 with delta = +$32 and theta = +$92. Today's volatility spike pushed it underwater but it remains delta neutral with a strong positive theta.

Conservative traders should remain cautious and protective, but I think the bulls are still in charge of this market. But there are many Chicken Little characters running around (younger readers may have to look that up).