Traders were encouraged by news of a debt ceiling deal this morning and stocks traded up strongly. But then it seemed that reality came crashing down on everyone - the ISM manufacturing index came in at 50.9 for July, down significantly from last month's 55.3, reminding us that the economy continues to struggle. In addition, many analysts finally tumbled to the prospect that America's debt rating was likely to be downgraded since the debt ceiling deal didn't really address the long term debt problem. SPX ran as high as $1307 before collapsing to a low of $1275, and then gradually rebuilding as the day went on. SPX closed at $1287, down $12 on the day. RUT lost $4 to close at $793. SPX closed above the 200 dma at $1285, but just barely. Trading volume was down from Friday's elevated levels, but remained high with 3.3 billion shares of the S&P 500 trading today; trading volume was down 4% on the NYSE and was down 3% on NASDAQ.

I took the opportunity to close the 900/910 call spreads of my Sept RUT condor, confirming a nice gain on the upper side of that position. The 670/680 put spreads remain almost two standard deviations OTM. Ironically, I also have the 670/680 put spreads remaining in the August condor position, but those spreads are about three standard deviations OTM. Unless the U.S. declares bankruptcy, the Aug and Sept condors should close with gains of 14% and 13%, respectively.

With the focus turning to the debt rating agencies, Standard and Poors and Moody's, this market malaise isn't likely to end soon.