The markets appear to be calming a bit today - no extreme moves and volatility is beginning to contract. SPX gained $10 to close at $2032. But RUT was weaker, closing at $1166, down $4. The VIX closed the day at 18.9%, down over a full percentage point. Trading volume fell off with 2.2 billion shares of the S&P 500 trading today. Trading volume declined 8% on the NYSE and declined 5% on NASDAQ.

The SPX chart now looks like a choppy sideways pattern is shaping up. A key question is whether SPX can break out above the 50 dma at $2045 or be pulled back closer to the low set by the last two pull backs around $1900. It is remarkable that we have seen three corrections or pull backs just since the beginning of December. One has to conclude that the bulls have sufficient strength to hold this market up, even if they appear to have lost the strength to drive it higher. And this also shows that the bears cannot really make a case for reversing the trend. Perhaps this balancing of power between the bears and the bulls is shaping up for a classic sideways market with higher than average choppiness.

The Stock Traders Almanac has developed two January indicators with good historic accuracy. One is the First Five Days indicator and the other is the January Barometer. The First Five Days indicator simply tells us that the full year will be bullish if the first five days are bullish; this indicator has proven prophetic 85% of the time and the January Barometer has a 77% batting average. The First Five Days "sorta" came out bullish with the first five days being up by less than a tenth of a percent. We have to wait until month end for the January Barometer. The Stock Traders Almanac also makes an interesting observation: there has not been a down market in the pre-presidential election year since 1939.

My February condor continues to plod along with a 4% gain thus far; we are now under thirty days to expiration, so this sideways market is working well for this position. The maximum gain is 19%, but we will likely close it early for less than that gain. We are well into earnings season, so we may see some market choppiness as traders attempt to translate individual company performance into overall market prospects.