The major market averages all traded up substantially again today. With all of the talk about tapering and Bernanke's replacement, who would have guessed two strong trading days in succession before the FOMC announcement? It is just one more example of how difficult it is to predict market direction. The cynic in me thinks all of those guests on CNBC take a strong, confident position with the idea that if they are correct, they can use that for marketing material for the next several months. If they're wrong, they just need to come out with a new prediction. But I digress...

SPX gained $7 to close at $1705, roughly $5 off its high for the year. RUT continued to outperform SPX, hitting a new all-time high at $1066, up $10. The VIX increased about two tenths of a point to 14.5%, probably the result of institutions hedging their portfolios in front of the FOMC announcement tomorrow. Trading volume fell off a bit from yesterday with 1.8 billion shares of the S&P 500 stocks changing hands. Trading volume on the NYSE dropped 11% and decreased 2% on NASDAQ.

The principal economic data reported today was the CPI, which came in basically flat at +0.1% for August. The NAHB Housing Market Index came in flat for September.

So now we turn to the FOMC announcement tomorrow afternoon. Who knows how the traders will react tomorrow afternoon? From all of the commentary on CNBC, it appears that the most common expectation is for the Fed to announce the beginning of tapering tomorrow. I find the bullishness of the past few days to be surprising in that light. It wasn't long ago that the market dropped 6% on just the possibility of tapering sometime later this year. Have we now talked ourselves into thinking everything is OK? One possibility for tomorrow is the classic, "sell the news". Or will the markets sell off if Bernanke says the economy still needs Fed stimulus? We'll see. Watch your exposure; it could be very volatile.