Update October 28th, 2010

***Added at 8:10am on 10/29/10:  Ceridian’s Pulse of Commerce Index suggests a GDP between 0.7% & 1.7%***

The mad men at the helm have ten times the data that we mere mortals have access to. THEY know what’s going on. THEY know that the market is rising on less and less participation, but it doesn’t matter. All THEY have to do is pump the highly weighted stocks, and the rally continues.

For instance, UPS was down 1% today and its chart is trash and no amount of propping can bring it back, so THEY pump FDX from down 70 cents to up 70 cents, and they do it in the blink of an eye, and $TRAN pulls out of its nose dive and almost closes green.

Meanwhile the Miracle, One-Color, Supernatural, Magical, Mystical $COMPQ defies clearly weakening internals and rises 4.11pts, even as AAPL closes red.

It’s getting out of hand.

But it’s very important that we all understand the significance of the phrase ‘providing liquidity,’ which means, in layman’s terms, “We buy dips.” So this morning when the markets were selling off, the HFT outfits, Market Makers, and assorted hedge funds were providing liquidity and buying shares of stocks no one apparently wanted. But THEY don’t do this out of common decency. No, THEY do it to make a profit and the only way to make a profit is to start buying shares at the market which then creates a back draft of buying by retail investors which the HFT outfits sell into. And they’re margined out 20-30 times so a 1% move nets them huge gains.

But I digress.

Chart of cumulative $NAAD showing another day of a drop while the $COMPQ rises. I think this is historic. If I have the time I’ll check, but I don’t recall when I went over the charts of $NAAD and $COMPQ any other period where the $NAAD fell for two days while the $COMPQ rose for two days. One day of going backward was all I recall. Check for yourselves.

Click here to open chart in new window.

Chart courtesy of StockCharts.com

I don’t know how much longer the market can be propped up. Two weeks ago I stated that I thought this would be the week we’d see some obvious signs of selling. We have, but not that much. $SPXA50R dropped again today, but $BPSPX rose. Weekly chart of $NYSI is rolling over and weekly chart of $NASI is on the verge of doing the same. Cumulative $NYUD/CVI dropped today while the $NYA added 28pts while the $TRIN closed at 1.11 indicating more stealth distribution. $NYUD hasn’t taken out the first support level, but it’s just a hare’s breath away. And thanks to KRE, IWM continues to under perform.

Be careful.