As the S&P 500 approached the $1500 mark last week, it prompted a series of news reports speculating on a pull back or correction at these levels. Friday's tape was very bullish, closing the day firmly in the $1500+ territory, but today's tape was a little more tentative, with SPX pulling back as low as $1496 and closing at $1500, down $3 on the day. RUT traded slightly more bullishly, adding $1 to close at $907. All in all, this market rally appears very solid. But no one can deny that we have moved upward a significant distance in a short period of time, so some traders are bit nervous that the good times may end. Trading volume was weak today with 2.4 billion shares of the S&P 500 stocks trading; the 50 dma stands at 2.5B. Trading on the NYSE declined 4% and increased 1% on NASDAQ.

Volatility has increased the past couple of days, closing at 13.6% today, increasing almost one point. This probably only shows the effects of institutional traders adding some protection to their portfolios to protect recent gains; after all, puts are cheap right now.

Mutual fund inflows have been on the rise toward the end of 2012 and hit $55 billion in January, an all time record. The next highest level was $54B in February 2000, just before the beginning of the bear market in March that year. That seems ominous, but maybe we are making too much of that data. Money has been flowing out of bonds into stocks for some time and that trend isn't likely to slow as long as interest rates remain so low.

The FOMC begins its two day meeting tomorrow, so we will probably see a sideways market as traders wait on Bernanke's remarks Wednesday afternoon. The only thing I see that might significantly affect the markets coming out of that meeting would be any suggestions of trimming or ending the Fed's quantitative easing programs.

My Feb condor on RUT remains 5% underwater with delta = -$157 and theta = +$178. Theta is starting to heat up a bit, but the call spreads remain tight, bordering on adjustment.