As the Dow Jones Index hits another all-time high today, smart money is rushing to the exits. You see, smart money knows when something is too good to be true. Unfortunately for the retail investor, they are doing quite the opposite. As institutions sell out on each new market price rise, retail investors are happily buying… hand over fist.

And why shouldn’t they? These are good times.

As I mentioned at the beginning of the article, retail investors are propping up the markets. However, they aren’t the only ones, or should I say, the only factor in keeping the markets from falling off a cliff.  Thanks to Uncle Sam, total U.S. debt has increased by $590 billion in just the past month and a half. Here is a table of U.S. debt from the data published by the fine folks at TreasuryDirect.gov:

The U.S. debt ceiling was finally breached on Sept. 8 as the Treasury added another $318 billion of debt in one day. Since that day, the U.S. debt has increased by another $271 billion. The addition of debt to the U.S. Government balance sheet had a wonderful impact on the stock market:

You will notice that the Dow Jones Index was running along the 50 Month Moving Average (BLUE line). Any breach below a crucial technical support line could force selling by traders. But, when the U.S. Treasury added another $318 billion of debt on Sept. 8, this propelled the markets higher. While I don’t pay much attention to technical analysis, many professional traders most certainly do.

And… as the U.S. Treasury added another $271 billion in debt, the markets continued even higher. So, what we have propping up the markets are DEBT and RETAIL investors. This is not a good sign. While the markets will likely continue higher, it will only give institutional investors more opportunity to sell out:

The ORANGE line represents SMART MONEY, the institutional investors. Here we can see what a proper investment strategy should be during a rising bubble market when one doesn’t suffer from the same illness as the retail investor. Furthermore, the savvy institutional investor is also able to understand the ramifications of the following chart: