Well, if you didn’t get a chance to watch the markets today, it was a classic selloff. The Dow closed down 84 points, the Nasdaq down 39, the S&P500 down almost 15.

Needless to say, this was a big relief for our SPY position. Just yesterday our short 153 call was briefly violated, and more than a couple of you were nervously asking whether we should exit. In fact, some bloggers and people in the financial media were saying silly things that would make you think we were never going to have another down day!

Of course, it finally came. And with the SPY just barely above 151 now, we have a good deal more breathing room. As long as markets don’t find some excuse to bounce back hard with renewed vigor this week, some nice market churn should help us capture more time decay (theta) and solidify our winning positions.

The IWM trade is also in good shape, although if the small caps don’t start showing some general strength, our put spread could get threatened before July expiration. IWM and RUT have been seriously lagging the large cap indices for some time now, but we would point out that much of the Dow upside has been generated by merger and acquisition announcements, i.e. event-driven movement that may give large caps a temporary boost but won’t allow any long-term index divergence.

Last thing to note: early this morning, I heard on the radio that “markets were having a good day, with the Dow up 4 points on good housing news.” Now, after the close, there are stories that take the same event - “good housing news” - and use it to explain the big down day (good housing news = no interest rate cut necessary = bad for markets).

It’s funny how the financial media will twist any data point you give them into a supposed explanation for how the markets move.