Early this morning, I looked at Yahoo Finance and was surprised to see a headline to the effect that the "world" was waiting on the U.S. Non-Farm Payroll Report. This jobs report seemed to take on even greater significance as we enter the new year and everyone is focused on determining which way the markets are headed. The jobs report was actually reasonably positive with a reduction in the unemployment rate to 9.4% and an increase of 113k jobs, but that improvement wasn't as dramatic as the market was expecting. Given that the consensus from economists was an unemployment rate increase to 9.8%, this report appeared positive to me at first blush. Bernanke's testimony to Congress this morning was conservative (he is a banker, after all), stating his expectation for continued economic recovery in 2011 but at a slow pace and with only modest improvements in the unemployment rate. For the first time this week, trading volume was flat with 4.2 billion shares of the S&P 500 stocks trading; trading volume was flat on the NYSE and dropped 6% on NASDAQ. The SPX dropped $2 to close at $1272 while RUT closed at $788, down $4. SPX was down as far as $1262 this morning before bouncing back and recovering most of its losses before the close.

Today's trading reaffirmed the $1260 support level on SPX that proved so difficult to break through as resistance in December. The other significant change in this first week of trading in 2011 was the relationship of trading in RUT vs. SPX. RUT outperformed SPX consistently throughout 2010, but has lagged SPX several days this week. Take today as just one example. SPX dropped 0.9% from the open to its low around noon today and closed down $2 or less than 0.2%. But RUT dropped 1.9% from the open to its low and closed down $4 or about 0.5%. The SPX/RUT relationship has reversed. Is this a leading indicator of a turn downward as traders seek the larger blue chips for safety? I don't know. But it does suggest that trading delta neutral strategies on RUT may not be as difficult in 2011 as it was last year.

I removed the hedges on my Jan SPX iron condor this morning; at the close, this position was underwater by $1439 with a position delta = -$73 and position theta = +$245. Time decay is really starting to accelerate as we enter the last two weeks of this position's life. But the $1300 calls are still uncomfortably close to the index price (their delta = 17). However, SPX has traded upward over $76 since we established the Jan condor. So we are doing well to still be in the trade with a potential gain of over $2000 remaining. By contrast, the Feb RUT iron condor is very nicely positioned and stands at a P/L of +$540 with delta = -$28 and theta = +$90. The short $860 call stands at delta = 8 while the short $690 put stands at a delta of 9.

The first week of trading in 2011 is now over and what do we know? It appears we remain caught in a stalemate between the bulls and the bears. So far, neither camp has been able to control the game.