The president and the media are getting their way, trying their best to scare everyone with the prospects of a global meltdown that starts with the U.S. defaulting on the debt. Haven't we heard this before? Did we go over the fiscal cliff? Did sequestration force us into recession? But it appears that the propaganda is starting to work. If you tell a lie long enough, everyone believes it. SPX broke through the 50 dma today, and appeared to be in free fall thereafter, closing at $1655, down $21. RUT gave way as well, breaking support at $1062 and then the 50 dma at $1050, closing down $19 at $1047. Volatility spiked upward, with the VIX touching 21% intraday and closing at 20.3%. VIX is now roughly where it was at the bottom of the pullback that ended June 24. But Obama still insists he will not negotiate, so we may see further declines in the markets before this is over.

I watch CNBC all day and I find it fascinating how several guests have pointed out why it is highly unlikely, if not impossible, that we will default on the treasury debt (see yesterday's blog for the details). But the hosts all continue to breathlessly worry about what will happen if we default. One has to wonder why.

Bearish technical data is starting to accumulate. The percentage of NYSE stocks that are above their 50 day moving averages (dma) has continued to decline since May, even as the market hit new highs. This shows a deterioration of the underlying health of the market even as the overall averages hit highs in August and September. And we have the historical tendency for market crashes occurring in October. The silliness in Washington coupled with the media propaganda may succeed in crashing this market in spite of the economic underpinnings. Don't get me wrong; the economy is certainly weak, and this is the weakest and longest economic recovery in history. But we are not in or near recession status. This drama is being orchestrated.

As it turns out, I was wise to close the put spreads on my October iron condor on RUT. It now stands at a gain of 7%; if the call spreads expire worthless, which now appears highly probable, we will end that trade with an 8.4% gain and our Flying With The Condor™ gains will be up +11% for the year. We are still lagging behind the S&P 500, but we are gaining on it.