The markets continue in overdrive. SPX closed at $1503, breaking the psychological barrier at $1500. It is interesting to note that about five minutes before the close, SPX remained below $1500. RUT continues to lead SPX. RUT traded as high as $905 yesterday but then pulled back. Today, RUT closed at a high of $905. These moves higher are significant: since 12/31, SPX has gained 7% and RUT has even outdone that with an 8.5% increase. These are huge moves in a little less than four weeks. And the gains are even greater if you measure from the low back in November. Many traders have been caught unawares by this massive bull run. Personally, I admit that I have been focused on the fiscal cliff, debt ceiling, spending debates and the prospects for a second recession before we have recovered from the first one.

This is a classic example of the market “climbing the wall of worry”. This situation is treacherous for the trader. He can jump on the bandwagon and take bullish positions. The danger is that after such a strong run, the likelihood of a strong correction is growing. So any bullish position needs to be protected with tight stops. Many technical measures suggest this market is overbought, but markets can continue to trade higher even when it defies the analysis. So it may be too early to predict an end of the party. But I do think caution is in order.

My Feb condor is getting squeezed by the relentless move upward. It stands at a 5% loss with delta = -$145 and theta = +$160. If the market doesn't slow next week, I will need to make some adjustments.

We finally have snow here in Chicago. I did my first shoveling of the winter this morning; the landscape is much prettier with snow.

Have a great weekend.