The severity of hurricane Irene was less than hyped by the media - have you noticed how everything is breathlessly covered as another "sky is falling" event? Remember the upcoming U.S. debt default? A couple of years ago we were warned that swine flu would not lead to an epidemic but a pandemic!!

The prospect of less damage than expected started a market rally this morning that surprised me by sustaining itself throughout the day. I expected some profit taking to slow it down a bit, but markets traded steadily stronger all day, closing at or near highs for the day. SPX closed at $1210. This broke through the highs set around $1205 in mid-August as the market tried to rebound. RUT closed up $33 at $725, also breaking through the high around $720 set in mid-August before the markets collapsed once again. However, trading volume was low with 2.7 billion shares of the S&P 500 stocks trading today; the 50 dma is 3.6B. Trading on the NYSE was down 20% and trading volume was down 13% on NASDAQ. Maybe everyone stayed home, expecting Manhattan to be underwater.

Many technical experts are warning us that this rally could be short lived and exhibit a re-test of the recent lows within the next month. To be sure, we are in a deep hole. SPX would have to break through $1260 just to return to the trading range of March through July and break even for the year. And SPX will have to break $1365 to reach new highs for 2011. That's a long ways from here. It is natural to be optimistic and hopeful that the bullish rally will resume, but a review of the damage in August is a bit daunting.

My Sept iron condor on RUT stands at a P/L of -$536 with delta = -$55 and theta = +$214. My Oct iron condor on RUT at 500/510 and 770/780 is hedged with Nov $770 calls and stands at a P/L of -$2,460 with delta = -$13 and theta = +$32. Both positions consist of twenty contracts. Assuming all the traders return tomorrow, will they take some profits? There are many bargains in stocks out there, but pick carefully and proceed slowly.