Well, I have mixed feelings about this post, as an Australian, and an observer of US markets I know your political culture, well, its proud, so I worry how readers might react to this one.  

This is what’s been bothering me, lots of money has been buying stocks at a time when they are not only priced to perfection but are so at a time when considerable geopolitical and economic risk lays dead ahead.  

But I could only find one  site that backed what I’ve been thinking.  To quote:

Surprisingly, we are not the only ones that find the stock market’s action somewhat odd, for as savvy market observer Laszlo Birinyi recently noted, “It is very odd not to have had a 1% down day in any of the U.S. large cap indexes for so many months.” Obviously, we agree, and in last Monday’s missive we termed this an “eerie situation” and reprised Dr. Robert McHugh’s (www.technicalindicatorindex.com) observations, as paraphrased by me:

The rally since July has been almost entirely short-covering. We get one big move, about once a week, on buying panic, then no follow-up. . . . Get this: All of the progress of this three month summer/autumn rally, all of it, occurred in only 9 days of trading, and all but one of the nine was a short-covering rally. . . . Other than those 9 trading days out of 63 since July 14^th, the other 54 days of trading produced only 4% of the upside progress, and zero since July 19^th. ZERO . . .!

We went on to note that while we can’t tell if those nine sessions were all “short covering,” we did take the time to check Dr. McHugh’s insights and found them to be right on point. Amazingly, those nine sessions [7/19 (+212); 7/24 (+182); 7/28 (+119); 8/15 (+132); 8/16 (+97); 9/12 (+101); 9/26 (+93); 10/4 (+123); 10/12 (96)] accounted for 1155 of the Dow’s 1200-point gain from the July lows. Even more amazing is that on ALL of those nine trading days, according to our notes, the aforementioned “mysterious” futures buyers were at work with the attendant arbs’ action.

Almost on cue those “mysterious buyers” showed-up early last week, at 6:30 p.m., to be specific, and drove the S&P 500 emini-futures contract from 1375 to 1397 in only two minutes, as can be seen in the following chart.

Only one party could be responsible for this buying. 

I note that the October 13^th edition of the Wall Street Journal had an article titled “Paulson Pulls for U.S. Markets,” which implies it just may be the the work of the Plunge Protection Team (PPT) . . . aka the President’s Working Group on Financial Markets that was created in 1988 by President Reagan under Executive Order 12631.

Now that could mean that your new Treasury Secretary, Mr Hank Poulson is using a crisis management tool to frame your majority party’s Congressional re-election effort with an appearance of stock market optimism.

For a nation that defines one of its key virtues as liquid and transparent markets, this seems a terrible shame,  one I must bring your attention to.

 The Elephant in the pit looks like it belongs to the G.O.P.