The markets opened downward this morning based on some weak economic data from Europe, but the bulls quickly recovered and pushed the markets upward. SPX dropped to $1514 but then rallied and closed at $1521, up $1 on the day. RUT closed up $3 at $924. Trading volume bumped up a bit with 2.8 billion shares of the S&P 500 stocks trading. Trading on the NYSE increased 6% and also increased 6% on NASDAQ. VIX declined about one third of a point to 12.7%.

Initial unemployment claims decreased by 27 thousand to 341k and continuing claims decreased 130k to 3.1 million. We have a heavy dose of economic data tomorrow with the Empire manufacturing survey, industrial production, capacity utilization, and consumer sentiment data all reporting. JP Morgan decreased their GDP forecast for 2013 from +2.1% to +1.9%, based on a pessimistic forecast of the sequestration debate in Washington.

Some of you may recall the property tax referendum in CA many years ago. The state and local governments whined and predicted all kinds of dire consequences, but once they realized it was inevitable, they found the waste in their budgets and slashed it. The firefighters and teachers remained employed after all the dust settled. Maybe sequestration will force the same hard and painful budget reductions in Washington. But I guarantee the media will carry nothing but horrible stories of what will be lost between now and March 1. Have you seen any government office that couldn't afford to cut at least 10% of their expenses? They might have to drop their cousins off the payroll, but I think it could be done easily.

In the meantime, what about this bullish rally? It looked pretty dark this morning, but the bulls didn't miss a beat and quickly turned it around. SPX does seem to have flattened here at $1520, but there are few signs of a serious correction as yet. Recent candlesticks are getting some long lower shadows, but that is the only sign of any weakness. And that may only be my imagination.