Traders focused on the FOMC statement I highlighted yesterday, "Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets." Thus, the day began with heavy selling and the selling just intensified as the day went on. The only glimmer of hope came at the end of the day as SPX bounced off the August lows after breaking through those lows a few minutes earlier. SPX closed at $1130, down $37 and RUT lost $21 to close at $643. Traders are debating whether the principal driver for the bears is the fear of a recession or fear of a debt problem in Europe spreading globally.

Trading volume spiked upward again today with 5.6 billion shares of the S&P 500 stocks changing hands; trading volume increased 39% on the NYSE and increased 35% on NASDAQ. In August, SPX hit closing lows around $1120 and intraday lows around $1100. During the last hour of trading today, SPX broke through to $1114, before bouncing back to close at $1130. I will be watching the opening closely tomorrow morning with those levels in mind.

Initial unemployment claims came in at 423k, down nine thousand from last week. Continuing unemployment claims dropped 28k to 3.727 million. Leading indicators dropped to 0.3% for August from the previous month’s 0.6% value. So our economic indicators and corporate earnings data appear to be continuing roughly sideways to slightly positive. But the fears of a double dip are so widespread, it has almost become a foregone conclusion.

My Oct iron condor on RUT only consists of the 500/510 put spreads at this time and they are still quite safe in spite of this downturn. The worst case scenario will be a small loss for October, but the game is far from over.