All eyes and conversations are focused on the Fed and tomorrow's announcement and news conference. So why did the bulls go crazy in the markets today? Beats me. I suppose one has to conclude that the consensus is that the Fed will not say anything to suggest a discontinuation of quantitative easing anytime soon. I think this market action just makes it even more likely that we will see extreme volatility in the markets after the announcements tomorrow. SPX gained $13 to close at $1652, but RUT was even more bullish, rising $12 to close at $1000. VIX decreased a touch to 16.6%. Trading volume declined with 2.1 billion shares of the S&P 500 trading. Volume decreased 6% on the NYSE and decreased 1% on NASDAQ.

If we look for economic data to explain today's huge bullish run, we will be disappointed, or at least perplexed. CPI came in for a modest 0.1% increase in May, which is good news on the inflation front. But economists expected 950k housing starts and received 914k. 974k building permits were issued in May, as compared to 1005k last month. So this crop of data just reinforces the now familiar "not too bad, but not too good" theme of the past several months.

My June iron condor on RUT stands at a net gain of $780 or +4% with delta = -$21 and theta = +$118. The July position stands at a net gain of $1,160 with delta = -$49 and theta = +$103.

The bullish nature of the markets this week has me very concerned. I think we are now positioned where even the slightest frown from Bernanke will send the markets tumbling. This Fed announcement and news conference has attracted more attention than any previous meeting, and that sets up the possibility of extreme reactions on the basis of virtually nothing substantive - be careful.