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A funny thing has happened in the last 6-8 weeks.  There are almost no sellers.  Literally.The market has made a massive directional push up and really just holds up and does not correct now.It seems almost funny now how difficult it is to short anything for more than maybe 20 minutes or more.As most traders find out – fighting the market is pointless, all you can do is react to what you are given.  But it sure makes trading hard – the buy and hold guys have it locked down.

One thing I know is that you cannot continue this indefinately – the chasing and then bidding the market so it wont sell will stop.  The only way you actualy make money, whether day trading or longer term investing, is to  lock in profits.  Until then its just a fantasy.  At some point they will tip the tide to the point where a majority are actually fearful of losing gains and then the selling is real.

A key pattern lately has been to break below support and then out of nowhere a massive burst of buying jams the market back to the highs.  It happens so often I now expect it to happen.Most of the time this results in a new low being made, followed shortly by new daily highs as the buyers chase like crazy.

Even when the economy was plowing along at full steam, we would have 10-15% corrections all the time.And this was what happened when everything was good.Because of this I am not sure what is actually going on.  Several theories are in play that I think about:

1. Shorts are completely or mostly out of the market.  The SEC messing with the short rules before caused a panic, and now there are many proposals again in regard to uptick rule and shorting.  Rather than get caught, they are staying away from day trading and longer term positioning.
2. Manipulation factor on high.  There is a group of large banks or funds that are pushing the market higher at the Fed’s and Treasuries request to try to turn the economy out of the recession by making it appear as if the stock market has it figured out.  The way the rescues happen like clockwork, the ramps into the close every friday, and other very odd trading behavior gives this some credence imo.  Would be easy for the government to just give these guys money to push the market up.
3. Traders are mostly gone, and computer algorithm trading takes over.  This one can happen as well – computers have taken over more of the futures trading which drives the market.Since no one tries to fight this trend, with all of them doing the same thing it just feeds on itself.  This one I like too because the actual variance of price during the rally pushes is actually uncharacteristically low most of the time.  I have seen the dow futures push up 100 pts in 20 minutes with maybe an 8-9 point max retrace the whole time.  Sure this happens – but not this often as it does now.

Whether any of these are true, or a combination, I have no idea and we may never.  All I know is the trading action is very odd and I expect at least half if not more of this gain to be gone when this is done.Note that I am not predicting a top in the market, I am simply stating that what goes up almost always goes down – and the down is usually painfull.The market could hit 9.000 or 10,000 etc.I relaly do not see 10,000 as possible right now, because GM, C and a few others are dead – they just don’t have the fuel short term.

Maybe everyone just needs to learn to trade again – this is the new market to stay!