The wild card on our side is now the mutual fund community. Historically the last five days of October are used for end of year window dressing. There is a flurry of activity and most selling is already out of the way. This coming week is reserved for buying winners as a sales tool for fund shoppers. Many funds have October as a year end and this provides the incentive. Also historically the best six months of the ********* year begins Nov-1st and many investors have made fortunes by using the strategy of buying in Nov and selling in late spring. While you may not subscribe to this theory it does exist. However the January effect was once a valid investment tool as well. That strategy has gone the way of all prior repeatable trends. Once they are commonly known traders try to beat the trend by buying earlier and selling sooner and the trend disappears. The January effect moved into late December then early December and then into the Thanksgiving week. Recently it has faded from view as buying and selling became more spread out. The end of October trend could be the next sacrificial offering. As traders buy earlier and earlier to capitalize there is nobody left to buy during the last week. Funds are not stupid, at least most of them. They plot these trends and attempt to profit from them. Those that wanted to profit from the last week of October would have bought over the last two weeks and they would sell into any window dressing next week. If the window dressing does not appear then funds who had speculated on it would still be forced to sell rather than hold stocks they had no long term desire to own. For traders the markets have been very exciting to watch. Lower openings with acceleration into the close. Poetry in motion! Volume on Friday was even decent with the NYSE trading over 1.2 billion shares and the Nasdaq nearing 2 billion. Decent, not strong. Advancers beat decliners even on the Nasdaq which lost ground on profit taking on a couple big caps. The comment was heard several times last week that happy hour had been moved up to 3M in the markets as the last hour has produced some strong moves. From a technical and sentiment standpoint the markets have been performing extremely well. Investors are counting on fiscal stimulus, tax cuts and increased government spending to bolster the economy and keep it from crashing. The GDP is estimated to be reported next week at -0.8% but nobody appears to care that the recession will be confirmed. They are looking 6-12 months into the future and counting on the rate cuts to provide long term growth again. Historically once in a recession the markets tend to do very well over the next 24 months and investors are taking that bet. It is the decline into a recession that crashes markets and we have already seen that chapter of this movie. Investors are so positive that earnings will improve shortly that they have ignored the continuing anthrax news and weak economic data. It is tough to fight the tape when it powers through all the bad news we have had over the last several weeks. This bullishness has a catch. The VIX closed at another post attack low of 30.53 and lost over five points for the week. The VXN is now at pre-attack levels and could break under 50 next week. Granted the monstrous volatility we have had over the last several weeks has created havoc with bid/ask spreads and increased premium prices, the threat of it collapsing is also real. When everyone lines up on the buyers side in the markets there is nobody left to buy. Once the current buyers are fully invested they need new buyers to push the prices up to the next level. If there are no buyers ready to pay higher prices then the rally will fail. Falling volatility means that nobody is buying puts to protect their positions because they do not expect the prices to fall. Great if it happens but Murphy is still alive and well.