For the past couple of weeks, it has seemed as though there was no end to this bullish run higher. Then the markets weakened on Tuesday and doubt set in. Thursday brought a significant decline and it appeared as though some degree of a correction had begun - perhaps just a slight decline and mostly sideways trading or perhaps the big, nasty correction so many have been predicting. But the bulls reasserted themselves today with SPX closing at $1936 for a gain of $6. RUT also strengthened a bit, closing up $3 at $1163. These aren't big gains, but it does tend to quiet the "sky is falling" crowd.

Expecting this bull market to continue straight up as it has for the past few weeks is silly. But predicting a severe market crash is an overreaction and ignores some obvious factors. First of all, corporate earnings have continued to grow; companies have been turning in reasonable results - it isn't boom city, but it isn't terrible by any measure. Secondly, and maybe more importantly, the Fed is still very much in this market, pumping in billions of dollars each month.

This discussion is meant to set up the question we are probably all thinking about: is the market going to continue up or correct back lower? I don't have the answer, but I have my own "best guess", for what it's worth. For the reasons cited above, I think the bulls have the edge. However, trees don't grow to the sky, and markets tend to ebb and flow in their progress, whether it is a bull or a bear market. By most measures, this market is fully valued, if not over-valued, so a little bit of a pause certainly would make sense. But this minor pause of the past three or four days may not last. After all, strong bull markets in the past continued higher long after everyone thought they were overbought. And this market has the Fed on its side. So my best guess is a slightly bullish to sideways market.

That is why Ihave been using diagonal spreads for the past several weeks; they seem to fit this market nicely. I also sold a call spread on RUT earlier this week to set up a new RUT condor. If RUT continues higher next week, I will sell the put spread; if not, I will wait.

Happy Father's Day to all of you out there. Enjoy the weekend.