For the last several sessions, traders have been taking a “wait and see” view of the markets. SPX has bumped up against resistance around $1465 for several days. This morning, that pattern reappeared, with SPX opening, trading up to about $1469, and then pulling back to $1461. But then the surprise: the markets strengthened around 2:30 ET and started trading upward to close at $1472, up $11 and finally breaking the highs set in 2012. So we are left with the question I posed above: Is this break-out for real? Trading volume remains at the 50 day moving average, so that is one data point arguing against the break-out. Can the markets break out with the backdrop of the debt ceiling debate? Maybe they can; it doesn't have to make sense.

New unemployment claims rose slightly this week to 371k, underscoring the fact that our country’s economic recovery is weak at best. This is a fragile economy. The debate about the prospects of another recession continue.

The Russell 2000 Index (RUT) has generally followed SPX by trading sideways the past few sessions, and closed up $2 at $881 today. RUT has been trading stronger than SPX in that it broke its own 2012 highs in mid-December. But today, RUT appeared to lag behind SPX.

Earnings announcements will probably determine the short term market direction until the debt ceiling talks begin to get serious. American Express announced layoffs today of 5,400 employees; AXP announces earnings January 17. Some of the major banks report next week.