The S&P 500 index couldn't hold above $1200 once again, closing at $1194, up $1. RUT closed down $1 at $704. Trading volume declined once again to 3 billion shares of the S&P 500 stocks. Trading volume on the NYSE dropped 15% and volume dropped 8% on NASDAQ. When one looks at the SPX chart, it is easy to postulate two very different conclusions: either a sideways consolidation pattern is developing or a downward trend is underway. The strong bullish trend ended in mid-February and we have been trading sideways ever since; of course, the decline of the past couple of weeks was a rude departure from that sideways trend. So now either of two cases can be made: 1) we are still in the sideways consolidation pattern, but just had a slight hiccup courtesy of the S&P bond downgrade, or 2) we started a downward trend on May 1. It is becoming harder to see this as a temporary respite from the bullish trend. The U.S. and European sovereign debt issues are the dark clouds hanging over this market; it is hard to imagine a strong bullish trend resuming.

The markets have cooperated with my August iron condor with put spreads at 600/610 and call spreads at 750/760. The put spreads are 7 standard deviations OTM and the call spreads are 3.5 standard deviations OTM. Thus, unless something dramatic happens tomorrow, I will allow both the call and put spreads to expire worthless this weekend. Currently the P/L for the 20 contract position stands at -$516, delta = -$10 and theta = +$550. The Sept iron condor on RUT is positioned at 600/610 and 780/790. Both spreads are outside of one standard deviation OTM and the P/L on 20 contracts is +$1,780 with delta = -$21 and theta = +$130. Watch that $1200 level on SPX for your clue on this market.