Traders chase both sides of Fed debate.

Is this a signature day for the markets? Not clear yet, but a couple data points: 1) heavy volume, 2) spike in volatility, and 3) a key paragraph from the FOMC Minutes:

"A number of participants expressed willingness to adjust the flow of purchases downward as early as the June meeting if the economic information received by that time showed evidence of sufficiently strong and sustained growth; however, views differed about what evidence would be necessary and the likelihood of that outcome."

Uh-oh...they mentioned a June meeting! It's over! Aargh!

Hold on: "views differed about what evidence would be necessary and the likelihood of that outcome."

They can't even agree on what evidence would be sufficient for them to begin tapering! With the voting members heavily weighted toward doves, does anyone think the Fed is going to taper in June? Anyone? I didn't think so.

In my informal, unscientific surveys of traders, only about 25 percent of the traders I talk to believe the Fed might begin tapering by September; the majority believe they will not do so until 2014.

They could be wrong, but unless we see Nonfarm Payrolls over, say, 250,000 for the next three months, I too think it is unlikely the Fed starts tapering in the next few months.

Instead of asking, "Why did we drop midday?," let me turn this around and ask, "Why did the Dow move up 150 points right after the Bernanke testimony--why were we up in the first place, given that Bernanke was very balanced?"

The answer is, traders are chasing both sides of the story.

The guys who believe the economy is weak--and that the Fed will not move before 2014--point to comments from the Fed minutes like, "Many on FOMC Wanted to Wait for Stronger Data Before Tapering," or "Many on FOMC Said More Progress Needed Before Slowing QE Pace."

Note the phrase, "many."

But many are now trying to position themselves hawkishly and are trying to drag the market in their direction.

Finally, several have asked why the market sold off at 1:00 p.m. ET--an hour before the Fed minutes. Silly theories that "someone knew something" aside (please), news of a police officer being killed--and hacked to death--in London--along with disturbing video of one of the apparent killers with blood-soaked hands--may have been a factor in the markets drop.

Traders overreact to Federal Reserve Chairman Ben Bernanke's comments. Mr. Bernanke, in his Q and A, essentially reiterated what New York Fed President William Dudley said yesterday: that any change in the flow of bond purchases will depend on the incoming data.

A question about whether the Fed might reduce bond purchases before Labor Day elicited the same reply: the Fed could reduce bond purchases in the next few meetings if the data supported it.

But stocks immediately came off their highs, bonds dropped on the comment. This seems to have been interpreted to mean there was some kind of imminent end to purchases was occurring.

Dudley warned yesterday that there was a real risk of the markets overreacting to any talk of tightening. Here is a good example of this.

Dudley also said it will take three or four months before the Fed will know if the economy is strong enough for it to begin tapering its purchases of bonds.

Most traders believe that the chances of June tapering is zero, with only a minority that something will happen in the July 30-31 meeting. Some believe the chances are higher for the September meeting, but most still think the data will likely remain weak and the Fed will not move until 2014.

If you don't think this is hard to parse, consider the two different headlines, this from Barron's: "Bernanke Doesn't Rule Out Fed Taper In the Next Few Months"; and this one at the same time from Reuters: "Bernanke Offers No Hint of Pullback in Fed Stimulus." Finally, this from AP: "Stocks Surge as Bernanke Retains Dovish Tone".

Why is this hysterical parsing happening? Because markets are now so dependent on central bank support, because organic growth is so lackluster, that any hint of premature withdraw of stimulus creates a knee-jerk reaction.

Unfortunately, we're going to have to get used to this. We're all parsing commas now, for every Fed official, into the foreseeable future.

Bernanke pre-empted by Dudley: Will he throw it back into Congress' lap?

Bernanke, in his written testimony, confirmed what Dudley and others had already said: That premature tightening of monetary policy could stall the recovery.

But how about this: How about a more aggressive Bernanke, one who insists that the Fed has done all it can, who turns the tables on Congress and insist that lawmakers begin addressing the fiscal issues?

Bernanke hinted at this in his written testimony, but let's hope he is more assertive in the Q&A: "To promote economic growth and stability in the longer term, it will be essential for fiscal policymakers to put the federal budget on a sustainable long-run path."

It's no secret most of the Street has been trying to anticipate--and trade ahead of--the anticipated Fed "tapering" of bond purchases.

Separate speeches today from the New York Fed's William Dudley and the St. Louis Fed's James Bullard have thrown some hot water on that thesis.

Mr. Dudley came right out and said that the Fed might adjust the pace of bond purchases up OR down; that the outlook was uncertain, and that he wasn't sure what way the Fed would be leaning.

Traders seem desperate to spin every Federal Reserve pronouncement hawkishly, so everyone will be listening for clues about possible tapering of quantitative easing when two Fed presidents speak later on Tuesday.

St. Louis Fed President James Bullard plans to speak at 11:30 a.m. EDT from Frankfurt, and New York Fed President William Dudley, who is a dove like Fed Chairman Ben Bernanke, will speak at 1 p.m. EDT at the Japan Society in New York.

Other than that, markets are likely to be quiet ahead of Bernanke's testimony on Wednesday. There will be the usual questions: When will the Fed start to taper its bond purchases? What would prompt the Fed to increase its purchases? Are the past few jobs reports really a "substantial improvement" in conditions?

The big event this week is Wednesday, when U.S. Federal Reserve Chair Ben Bernanke testifies in front of the Joint Economic Committee, while the Fed releases the FOMC minutes to the April 30 and May 1 meeting.

The markets were all aflutter last week as John Williams from the San Francisco Fed (a dove) indicated he wanted to taper off purchases sooner rather than later.

But Bernanke is likely to reiterate exactly what he said at the May 1 meeting: that they are "prepared to increase or reduce" their bond purchases as the labor markets or inflation outlook changes.

(Read more: Bulls Will Be Driving Market, but Bernanke Is Steering)

The first quarter earnings season is mostly over, but next week we get the last wave of reports from retailers...that's because most retailers report on a February to April quarter.

So we'll hear from Home Depot, Best Buy, Saks, TJX, Lowe's, Gap, Target, Ralph Lauren and Autozone.

Big Data's first IPO is a big one. Tableau Software opened at $47, after pricing its initial public offering at the NYSE at $31. The initial price talk was $23-$26, then it went up to $28-$30, before pricing at $31.

(Read More: Big Data's First IPO Is a Big One)

Wait, there's more: the initial offering of 7.2 million shares was upped to 8.2 million shares. So instead of pricing 7.2 million shares at $24 (the mid-range) and raising $172.8 million, they priced 8.2 million at $31, raising $254 million.

Tableau Software (DATA) priced its IPO at the NYSE at $31. The initial price talk was $23-$26, then it went up to $28-$30, before pricing at $31.

Wait, there's more: the initial offering of 7.2 million shares was upped to 8.2 million shares. So instead of pricing 7.2 million shares at $24 (the midrange) and raising $172.8 million, they price 8.2 million at $31, raising $254 million.

(Read More: Fed's Williams Gets Markets Moving)

Not bad, eh? A software company? It's simple: Big Data. It's the new magic word, like "cloud computing" was a year ago. Their software allows customers to analyze large data sets using proprietary drag and drop commands. The company's description of what it does is refreshingly free of a lot of the jargon terms that characterize so many company descriptors. They help people see and understand data, to quickly analyze, visualize and share information. Get it? And no leveraged buyout here.

Stocks weakened shortly after 3 PM ET as the President of the San Francisco Fed, John Williams, said the Fed could begin easing up on bond purchases later this year.

So? Is this a surprise. It's important because Williams is a dove, which is why his comments are generating interest. Remember: there is a substantial community that believes the Fed is going to taper their purchases in September....and have positioned their portfolios accordingly. Traders with this view are seizing on anything that support their position. Talking your book, anyone?

But hold on. For one, Williams is not a voting member of the FOMC.

Second, Williams made it clear that the barrier for reducing purchases was a high one: "It will take further gains to convince me that the 'substantial improvement' test for ending our asset purchases has been met," he said.

Substantial improvement? Though Williams says the economic outlook is "clearly improving," you'd be hard pressed to see it this week. The economic data is going in the other direction! From May Empire and Philly Manufacturing, to April Industrial Production and Capacity Utilization, to today's April Housing Starts and higher Initial Jobless Claims, the data has been terrible this week!

Here are other headlines from his comments:

JOB MARKET STILL HASN'T MENDED ENOUGH TO END BOND BUYS

EVEN IF TAPERED, BOND BUYING COULD BE BOOSTED IF NEEDED

Get it? He's repeating what Bernanke said...if things get worse, they will ramp up, not down.