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SPX gapped open higher this morning and gained $31 to close at $1896. RUT was also rallying with a close at $996, up $24. Volatility contracted a little over a point with VIX at 24.1%. That contraction seemed smaller than the bounce in the markets, causing me to wonder if there is more downside to come. SPX closed at its high for today, a strong bullish sign. Trading volume was strong, but not much higher than Friday with 3.0 billion shares of the S&P 500 trading. Trading volume on the NYSE was flat and volume was up 7% on NASDAQ.

The Empire manufacturing survey issued a report today at -16.6 for February, not very good, but an improvement over January's -19.4. The FOMC minutes will be issued tomorrow. It is hard to predict what might come out of reading those tea leaves.

Today's strong run on SPX took it back to the middle of the Bollinger bands. Keep in mind that the last bounce higher in SPX only made it to $1940 before collapsing.

But, on a positive note, today's run higher was a breath of fresh air for those with underwater put spreads going into Feb expiration. But I took my losses last week rather than sit on pins and needles all weekend.

Now we sit and wonder, is the "sky is falling" crowd correct? Is this only a temporary respite?