IS THE MARKET BEING "PROPPED UP"?

Something is going on in the market right now. I've been a bit discouraged as countless high probability signals have been taken out by low probability moves. I've heard talk of the recession being over and a recovery underway, even though jobs and real estate are showing no real signs that they are improving. I'd buy the argument if at least one of those was showing signs of life. I've heard that this time it is different...that this is a unique situation that we are in. That the old rules don't necessarily apply in this case. I heard a similar argument during the internet bubble of 2000. People said that these internet stocks could continue to go higher because this was a different economy...that the "old rules" had to be thrown out. That the insane multiples would be justified in a few years. We all know what followed. I'm used to being wrong at times in the market. It happens to all good traders. But something is going on in the market right now. The markets have moved up dramatically over the last month, but it has done so on anemic volume. We expected to see volume increase as we exited the summer months, but we haven't seen any dramatic increase. The market is overbought and there are divergences all over the place. It simply feels like the market is being propped up. The only entity large enough to prop it up would be the Fed...although with the lighter volume there are a few hedge funds that might be large enough to cause a few moves. The point is...be careful. If things are being propped up, there will be a big collapse if it doesn't work...and I've never witnessed a time where it has worked. I have often joked that the folks at Enron went to jail for the very thing that the Fed did during the financial crisis of 2008 (prop up and talk up the stability of the banks until they could recover). It might not be a joke anymore. I don't want this to turn into a conspiracy theory blog. I don't have any proof and I'm probably not smart enough to figure it out anyway. I just know that some of the price movements have not made much sense to me lately. A big drop within the next few days would at least make me feel that my instincts are correct and lessen the need to look at possible government conspiracies. You have to understand that there is a lot of stuff that goes on behind the scenes that we don't find out about until after the fact...and I'm not just referring to government conspiracies. Even though we don't usually find out about the "behind the scene details" until later, the clues often show up in the charts. If we can recognize the clues, we can often profit...even without the benefit of the inside information. I might have to wait a bit longer to see if I am correct about this one.

GMCR, a bearish pick from a few days ago, just got flagged for "accounting irregularities". It will likely drop big tomorrow at the open and will probably drop further over the next few days. The put options will likely be inflated so either try deeper in-the-money options or use spreads...like a Bear Put Spread or a Bear Call Spread...to offset the inflated prices. AAPL made a significant move down today. It had not one, but two mini "flash crashes". We'll see if there is more follow through tomorrow. Keep an eye on some of those other overbought stocks that I mentioned in the last posting. They are definitely due for at least a modest pull back. Cash is a safe place to be right now, so don't be afraid to sit it out for a little while.