Two key elements of the market's rise -- short-sellers covering their positions and money managers looking for quick profits -- are waning, reducing buy-side volume.

This will eventually impair the market's ability to sustain itself as more shorts are entering the market and more managers are preparing to bank profits before the end of their year on Nov. 1.

Next: Sign #10: An eerie similarity

The conspiracy theorists have been arguing for month that aggressive short-selling and illegal naked short selling played a significant role in the financial collapse.

Bad news: The data just doesn't back that up.

Judge Donald S. Goldman of the Superior Court of New Jersey dismissed Biovail's (NYSE: BVF) lawsuit against SAC Capital Advisors last week, saying that he lacked jurisdiction.

The lawsuit, originally filed in 2006, accuses SAC of colluding with analysts and other firms to produce misleading research designed to drive down the company's share price -- allowing the firm to profit from its large short position in the company's stock

Goldman wrote that he had not evaluated the merit of Biovail's claims, but did say that the company had failed to show that it was entitled to damages, even if its allegations were true. Another judge who had dismissed another Biovail-related lawsuit said that the company's history of securities fraud and run-ins with regulators gave the case a "tainted origin".

Investor and trader Mishko Janusevich, he of decent-sized net worth fame, had a mantra that he used to repeat while outlining the top, new stock shorts that appeared that day, as determined by technical indicators.

He would stand next to the overhead projected stock chart at the front of the trading room, point to the stock chart and recite, "You see this stock? You see that it's dropped $8 in past two days? You think it can't drop any more? SELL THAT STOCK, it's dropping more!!"

Has your broker repeatedly sold you on the "safe" investment vehicle, the mutual fund? Investing in a wide variety of prominent companies, with solid, long-term track records, mutual funds have been an easy-to-understand and popular investment choice for decades.

Mutual funds are hugely diversified, holding large stakes in recognizable names such as Google (NASDAQ: GOOG), Citigroup (NYSE: C), Walmart (NYSE: WMT), Starbucks (NASDAQ: SBUX), General Electric (NYSE: GE), Bank of America (NYSE: BAC), and Fannie Mae (NYSE: FNM).

The Wall Street Journal headline reports (subscription required) that the SEC is "deluged" with support for the return of the uptick rule. Investors who've watched their portfolios hemorrhage value are quick to blame those mean, nasty hedge fund short seller-types.

I'm going to write something here that probably flies in the face of what most people are thinking but here it is: Who the heck cares what most people think about the uptick rule? Seriously. Of course most investors are going to oppose anything that makes it easier for stock prices to fall but the role of the SEC is to maintain a fair and orderly stock market -- not to appease the short-term oriented desires of people who want to look at their portfolio statements and see black.

Options and trading specialist Bernie Schaeffer selects stocks based on a combination of fundamental, technical and sentiment-based metrics.

His research leads to long trading positions for his Schaeffer's Master Portfolio and short trading plays for his Schaeffer's Short Selling services.

Here's a long at four of his latest trading ideas -- long positions in Netflix (NASDAQ: NFLX) and VMware (NYSE: VMW) as well as short position in Exxon Mobil (NYSE: XOM) and Apple (NASDAQ: AAPL).

Newly-installed SEC Chairman told a public round-table meeting that she has "made it a priority to evaluate the issue of short-selling regulation, and ensure that any future policies in this area are the result of a deliberate and thoughtful process."

The SEC has floated a number of potential proposals for dealing with the short-selling "problem," including making it illegal to short sell stocks that are down 10% or more. One popular "solution" is to bring back the recently revoked uptick rule that required short sellers to execute trades only on an uptick -- if the last trade was at $20.00, you could only sell short at $20.01 or higher.

The short sellers are back in force.

• Short selling in Citigroup (NYSE C) is up six fold since February 27
• Short sales for Bank of America Corp (NYSE BAC), Met Life (NYSE MET) and Amercian Express Co (NYSE AXP) are up 40%
• Short sales for 18 banks are twice as high on April 15 as they were at their peak last year in July

You are probably asking why is this happening? Overall, investors are seeing that the process of "stress tests" is not being managed well. When there is uncertainty, investors prefer the short side to protect their other long positions.

In a distinctly depressing sign of the times, BJ's Wholesale Club, Inc. (NYSE: BJ) announced today that it will begin accepting food stamps as payment at all 180 of its retail locations. Food-stamp payments will be processed through the Electronic Benefit Transfer (EBT) system.

"BJ's recognizes the diverse financial status and changing needs of its members," commented president and CEO Laura Sen in a statement. "We are proud to help members stretch their food budgets by offering savings on a large selection of fresh fruits, vegetables, meats and baked goods, along with name-brand, non-perishable staples."

There was a strong outcry last year: "Stop the short selling. It's killing the market." Short sellers were blatantly selling short and then "failing to deliver the stock."

So what exactly was happening? First of all, in order to sell short (sell something you don't have) you must first borrow it from someone else. Usually there are willing lenders at large brokerage houses. What you are trying to do is to sell the stock first and replace it a lower price later on (that is if the market goes your way -- down).

Last year we saw traders selling short without first borrowing the stock. Then, when the buy trade to replace it was executed, there was no stock to deliver. Remember, they were supposed to borrow it first. This is called a "fail to deliver" trade. Former SEC commissioner Roel Campos wrote a letter and posted it on the SEC's website saying: "these companies are instead targets of illegal and manipulative trading with intentional failures to deliver used by traders to extract profits as the share price plummets."

The Wall Street Journal reports (subscription required) that "The Securities and Exchange Commission received 5,000 complaints over a year and a half about an aggressive form of short selling that critics call market manipulation, but it didn't bring any enforcement cases, according to a report by the agency's inspector general."

While Ben Bernanke's announcement that the Fed was buying Treasuries and sucking up bad mortgages was the cosmetic reason for financials to soar, an equally compelling reason may have been the massive but little-noted short squeeze that the announcement, combined with large government purchases of stakes in these companies, engendered.

The SEC is expected to propose within the next month that the uptick rule be restored in the stock market. The uptick rule required that short sellers only short stocks on an uptick and was designed to prevent bear raiders from driving stocks down with aggressive shorting.

The S&P 500 is down 53% since the rule was scrapped in July of 2007 and Barney Frank and Chris Dodd are among the proponents of bringing it back.

With conspiracy theorists and corporate crybabies up in arms about short sellers and their exhibitionist twins -- naked short sellers -- manipulating markets and causing the collapse of companies like Bear Stearns, the man in charge of regulating the British market, says that's just a bunch of poppycock.

Adair Turner, the chairman of the Financial Services Authority, said that the FSA's lifting of the ban on short-selling last Friday had not played a "significant" part in the meltdown that has occurred in the interim.

"So far, we have not seen stuff (that) suggests that short-selling and in particular abusive short-selling has a significant role in what has occurred, he told the BBC.

Let's recap: Last September short-selling was banned and then the ban was lifted and the market absolutely crumbled within a week. Why? Because people were concerned that the financial stocks had no value because they would require nationalization to avoid outright failure.

Short-sellers are a convenient scapegoat for the current mess but so far there's very little to indicate that it has any relevance at all.