The markets opened this morning and continued yesterday's rally after Bernanke promised another couple of years of cheap money, but the enthusiasm quickly faded. Markets turned down late morning and spent the balance of the day in the red. SPX lost $8 to close at $1318 and RUT lost $3 to close at $793. Since the first of the year, the averages have made strong gains, so much so that many technical indicators have been flashing overbought. This has left many analysts predicting a correction while the markets pushed higher. There are many factors at play here, pushing the markets in conflicting directions. Late January after a strong bullish run is often a positive time for the markets due to institutions wanting to show clients they are long the bull market and haven't been left behind. And, Bernanke's promise of easy money certainly helps. And the overall market averages are cheap by most any historical measure. But then we have the prospect of a Greek default and the rest of the European sovereign debt crisis weighing us down. And we may have a large number of traders who are anxious to lock in some of the gains they have enjoyed so far this year, especially after the beating most institutions and hedge funds took last year. And we have the historical pattern of a decline in late January after the so-called Santa Claus rally. The bottom line is that it is awfully hard to predict the end result of this confluence of forces.

Trading volume actually increased a bit today with 3.5 billion shares of the S&P 500 trading; volume increased 4% on both the NYSE and NASDAQ. The VIX increased about a third of a percentage point today, closing at 18.6%. But intraday, the VIX actually dipped below 17%. It doesn't appear that the large institutional traders are too concerned about a correction. Should I be reassured or worried by that measure?

Today's dose of economic data wasn't terrible, but it wasn't inspiring either. Initial unemployment claims reported out at 377k, up from last week's 356k. Durable goods orders rose 3.0% in December, but they rose 4.3% in November. And new home sales declined from November's 314k to 307k in December. So our economy seems to be just plugging along with minimal progress, but not sinking further either.

My February RUT iron condor at 590/600 and 840/850 stands at a P/L of +$2,080 with position delta = -$72 and position theta = +$97 on 20 contracts. It will be interesting to see how the balance of January plays out.