I have been told - and I cannot substantiate this - that there are many hedge funds who have written a dump truck full of naked put options in the 1330-1350 range.  If the S&P gets to that level, we would enter into a vacuum as the put writers would be forced to cover, causing the market to crash. 

So, the market is in a freefall Wednesday, resuming its plunge that began a few weeks ago.  It looks like we could get to the 1350 mark by the day's close.  Then, around 1:00pm, someone steps in and starts hitting the bid, hard.  The shorts cover and an intra-day reversal occurs, not only recovering our losses but sending the market into positive territory. The rally carries over into Thursday, even though a bad PPI report makes a Fed rate cut far less likely, which one would think would have hammered this fragile market. 

Friday is expiration day.  Many of those options referenced above will expire worthless. And if they do expire worthless, a violent correction is avoided.  For now.

Proof?

Absolutely none.

But stuff doesn't happen like this in our efficient market, does it?  Nah!

The staff of Toro Capital Management, hard at work, watching Bubblevision all day.