Yesterday, I mentioned that Exxon was the boat anchor holding down the SPX and Dow. And sure enough, XOM was down again on Wednesday. But why Exxon? Why is Exxon being sold?

I believe I have solved the mystery. Almost two months ago, I wrote about how the mutual funds were suffering redemptions. Well, guess what? The redemptions have not stopped. In fact, mutual funds that invest in US stocks have now suffered redemptions for 18 weeks in a row. Hard to believe, right?

So who’s buying stocks? Pension funds? Hedge funds? Sovereign-wealth funds? The Fed? Beats me. If you have a theory, I’d be interested to hear how the the market can levitate while the mutual funds bleed out. This is a very odd market.

In any case, fund managers are likely selling Exxon to raise cash to meet redemptions. Exxon is actually down 16.4% this year, so tax-wise, it’s better than selling Apple, which is up 122.7%.

What happens in 2010 if the redemptions don’t let up? Something else has to be thrown overboard, right?

At first glance, it looks odd that the SPX can’t break 1120 and the Dow can’t break 10,500 while the NDX just sailed right through 1815. But the mystery is solved once you look at the Exxon (XOM) daily chart. That’s a big stock with a big effect on the large-cap indexes, and it is not validating a breakout.

Neither is oil itself (USO), or commodities in general (DBC). Energy stocks (XLE) have been the worst-performing sector over the past few weeks. The XLE is down 2.86% since November 16th.

Everybody is carrying on about how the surging dollar isn’t effecting stocks, but that isn’t exactly true. It does indeed seem to be hurting energy stocks, and might be what is preventing the SPX from breaking out after all.

This is a serious problem for the bulls. If the recovery is so fabulous, why are commodities stalled? And for the bears, if you see Exxon starting to turn up, well, let’s just say that you are being given an IQ test.

The bulls can breath a sigh of relief that the government is done reporting third-quarter GDP. The first estimate was 3.5%, the second was 2.8%, and the final number reported at 8:30am this morning was 2.2%.

The market has peaked above the top of the infinite rectangle more than it has poked below it. This might be a small bullish clue. What else can I say? In a dead-flat market, it’s hard to find even a straw at which one can grasp.