The long awaited downgrades of the sovereign debt of nine European countries were announced today and talks broke down for negotiating Greek debt to avoid an outright default. With those headlines alone, you might have expected a bloodbath in our markets, but that wasn't the result. SPX dropped as low as $1278 but recovered much of the early losses to close at $1289, down $6. RUT also lost $6 to close at $764. The other surprise was trading volume. Trading in the S&P 500 was flat from yesterday at 2.8 billion shares; this is just below the 50 dma at 2.9B. Trading on the NYSE was up 4% and volume was down 1% on NASDAQ.

A similar story was told in the VIX. It jumped early today to 22.4% but closed at 20.9%, for an increase of 0.4 points. The University of Michigan Consumer Sentiment report came in for January with a 74.0 reading, up from last month's 69.9.

I must admit to being surprised at this market's reaction to the negative European debt rating news. One must conclude that the fears of a spreading "European contagion" are not as strong as I once thought. GS only traded down by $2.25 today. And remember we had a potential "double hit" to financial stocks with the European debt news and the disappointing earnings announcement from JPM.

Today's slight pull back actually helped my Feb iron condor spread on RUT with 20 contracts. It now stands at a net gain of $2,020 with position delta = -$38 and position theta = +$74. I don't always mention it, but remember that position Greeks are dependent on the number of contracts, so if your position Greeks don't match mine, that is likely the reason. Earlier today, I was a bit concerned about negative developments in Europe over the weekend impacting world markets Monday while our exchanges are closed. A couple of years ago, something similar happened, leaving us with hugely negative futures for Tuesday morning. But today's recovery from intraday lows shows significant underlying strength in this market. I still worry, but not quite so much...

Enjoy your weekend. If you get a chance, download Martin Luther King's "Dreams" address. I think you will be surprised how far afield we have drifted from his dream. Now, more than ever, we focus on a man's color, not his character.