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The bulls have been on a strong run higher for the past couple of weeks. Today's slowing only seems natural. SPX broke through the magical $2000 level with a close at $2002, up two dollars on the day. RUT continues on a tear with a twelve dollar gain to $1094. When one thinks of the small caps as the "risk on" stocks, RUT looks very bullish. But RUT has far more to make up from the correction than does SPX. Even with the strong moves higher the past couple of weeks, RUT remains below the lows hit in the initial flash crash on August 24th.

Volatility was largely unchanged with the VIX at 17.2%. Trading volume pulled back today with 2.6 billion shares of the S&P 500 stocks trading. Trading volume on the NYSE declined 20% and trading on NASDAQ dropped 6%.

URBN was trading very strongly the past few days, probably in anticipation of its earnings announcement this evening. I entered this trade and shared it with my trading group today: URBN Mar/Apr 25/28 diagonal call spread for $234. Due to the high volatility before the announcement, I was able to sell the Mar call for 39% of the price of the long April $25 call. Even though the earnings announcement is a dicey time to go bullish on any stock, we hedged our downside nicely by selling so much premium to significantly reduce the cost basis in the long April call. In after hours trading, URBN has traded up to $31.44, so it looks like we have a big winner.

Now the market debate has turned from "the sky is falling" to "how high can it go?" I think both extremes are wrong. The basic economic data don't support a strong bull market. But those same data don't justify all of the doom and gloom of the past few weeks either. We may also see some treading water in the markets as the FOMC meeting next week comes into focus.