The markets played out what has become the usual game plan up to a point today: the S&P futures were down last night, the markets opened downward this morning, and then started strengthening. But then the markets broke the pattern by selling off in afternoon trading, driving the closes to values near the lows of the day. SPX broke support and traded below $1337 this morning before rebounding. About 2 pm this afternoon, SPX reached $1347 and then sold off into the close at $1338, down $15. RUT closed at $779, down $11. This was not the usual bullish support pattern we have been seeing of late. On the other hand, trading volume fell off today, after being above the 50 day moving average for the past four sessions, it dropped below the 50 dma to 2.6 billion shares today. Trading volume was flat on the NYSE and down 4% on NASDAQ.

Support and resistance levels are a bit fuzzy, so it isn't obvious that SPX has broken the support level at $1340 with today's close. I felt better this morning, seeing SPX bounce back above $1340 after flirting with $1336. If the markets open weakly again tomorrow, we could be searching for the next support level - $1310? To continue that pessimistic thought, note that the VIX spiked up and closed at its high today of 21.9%. The big institutions are starting to hedge themselves and that worries me.

I find it interesting that only a few weeks ago, traders had decided the European debt problems didn't pose a problem for the global economy. Even when S&P downgraded Spain's debt by two categories, the markets yawned. But that has all changed. Now the sky is falling. Of course, the bungling over at J.P. Morgan doesn't help.

My May iron condor on RUT continues on toward expiration with a net gain of $1,280 with delta = +$37 and theta = +$315. Even with the recent market weakness, the put spreads at 720/730 remain well OTM; the delta of the 730 puts is 4. The June condor stands at a P/L of +$700 with delta = +$33 and theta = +$80.