What Is Causing Today's Market Swing And What Next

The US stock market swung wildly today with the Dow up 100, down 110 mid-session and closed up 90. I am listing the following factors in order of importance according to me:

1. Full Moon, total lunar eclipse---Bullish and Bearish

2. Ukraine tension escalates---Bearish

3. Big market drops in Shanghai, Germany, UK and France---Bearish

4. Coca Cola and Johnson & Johnson both reported good earnings---Bullish

4. US housing index and Empire State Survey worse than expectation---Bearish

4. Dow and S&P 500 met resistances at their 50 day moving averages and Russell 2000 broke support at 200 day moving average. ---Bearish

5. Nasdaq Composite found support at 200 day moving average and Russell 2000 recovered above 200day moving average.---Bullish

As for the near future, the stock market has bottomed out short term technically, stock market should move up tomorrow with the help of better than expected earnings from Intel and Yahoo. Dow may move up to test its all time high at 16631.

Charts for major market indexes, strong ETFs and the strong stock within them:

Importance of Technical Analysis

I am a die hard fan of technical analysis. I trust the chart because it have been helping me making good money. I am quoting CNBC's Bob Pasani who said it best:

"Seriously: How can you possibly have a lot of faith in fundamental analysis when, for example, YELP (YELP) goes from $100 to $60 in six weeks? Or Netflix (NFLX) goes from $450 to $320 in the same period? Of course, fundamental guys argue that stocks get overvalued. Duh. But say what you will about technical analysis: If you are in a sector where fast money is prevalent, you are a fool if you don't have very good entry and exit points, most of which will be built around technical. "

Fed QE causing bubbles on SOCL, IBB, FDN etc.

Fed Governor Dan Tarullo once said:  "Expectations fostered by forward guidance of continued low rates, may be incentivizing financial market actors to take on additional risks to boost margins, thereby contributing to unsustainable increases in asset prices and a consequent buildup of systemic vulnerabilities."

The recent bubble bursting on high flying sectors such as Biotech IBB ,Social Media SOCL , Internet FDN and other momentum stocks have confirmed his worries. They are either already broken or on the verge of breaking below their 200 day moving averages. Breaking below 200 day moving averages means they are entering bear market and prolong down turn is to be expected.

Mid-Session Market Comment

Major U.S. market indices opened this morning with small losses, they then began to plunge 10 minutes after trading start , they are now down sharply by over 1%. Yesterday's exuberance on interest rate may not rise as early as expectation after Fed meeting minutes were released has subsided today. Instead, news about Russia may stop the supply of natural gas to Ukraine and Europe raised investor concerns on increasing tension in Ukraine situation. Pessimism on corporate earnings also asserts downward pressure on the market.  High momentum sectors such as Biotechnology IBB, Internet FDN and social networking SOCL again led the stock market down. Technically, both the Nasdaq and the Russell 2000  after regaining 100 days moving averages yesterday have fallen below them again today. Today's bearish action has generated sell signals for these two indexes.  Their next supports are 4000 and 1100 respectively. Blue-chip indexes, the Dow and the S & P 500 have also been dragged down ,they are falling towards their 50-day moving average support at 16173 and 1843 respectively. The stock market will likely continue to go down all day today.

Closing market comments 04-09-2014

Major U.S. market indexes opened slightly up this morning,  they then surged mid-session and closed sharply higher with average more than 1% gain. Fed's last meeting minutes showed several Fed officials said the expectation on pace of rising interest rates is overdone. This news release led to mid-session stock market rally as investors were relieved that interest rate will rise later than earlier. Both NASDAQ and Russell 2000 Index rebounded today for the second day, and have recovered above their 100 day moving averages. Their next resistances are 50-day moving averages at 4223 and 1164 respectively. Blue-chip indexes, the Dow and the S & P 500 may have another opportunity to challenge  new highs in the near future. Their historical high resistances are 16632 and 1898 respectively. The stock market may be up again tomorrow, it may then be stopped by  the above mentioned resistances. Russell 2000 is only less than 5 points away from its 50 day moving average and would be the first one to hit resistance. Today's strong sectors are biotech IBB, social media SOCL, internet FDN and solar energy TAN and their representing stocks are VRTX, FB,YHOO and SCTY.

Mid-Session Market Comment 04-07-2014

U.S. market index fell this morning at the open ,  rebounded and are falling again, they are now down over 1%. For the last two weeks momentum sectors such as  Biotechnology (IBB), Internet (FDN),  social networking(SOCL) and Technology (XLK) have been have been down significantly. As a result both Nasdaq Composite and the Russell 2000 index have dropped below their 50 days and 100 day moving averages and caused a lot of technical damages. Leading stocks such as Amazon.com (AMZN), face book (FB), Twitter (TWTR) and Netflix (NFLX) , etc. have fallen more than 20% from their highs and are  technically entering bear market. They likely will continue testing bottoms. Many momentum stocks are held by hedge funds which have suffered heavy losses during the latest sell off, they will likely continue to sell shares and will be negatively impacting these stocks. Meanwhile high frequency computer stock trading is under investigation by regulatory authorities will also negatively affecting the stock market . High frequency trading is considered the driving force behind high flying momentum  stocks. Share prices may suffer without their push. The two stronger blue chip indexes, Dow and S&P 500 are already feeling the drag of the continue weakness in NASDAQ and Russell 2000. Since both the Nasdaq and Russell 2000 are dropping nearly 7% from their highs and the Dow and S&P 500 only dropping nearly 3%, the later two indexes may be playing catch up to the downside .Technically, it is likely that the Dow and S & P 500 index will at least fall to their 50 day moving averages around 16143 and 1839 respectively and there's a good chance they may not be able  to hold. Fundamentally, investors concern over weakening Chinese economy and the possible early Fed rate hike while first quarter corporate earnings worries are also not helping the market.

Mid-Session Market Comment 04-03-2014

Major U.S. stock market indices opened this morning small gains and have been trending lower. Increase in Initial Jobless Claims, ISM services index lower than expected and trade deficit in February expanded are having negative impact on the stock market. Last week's sharp pull back of high momentum sectors such as Social Networking  (SOCL), Biotechnology (IBB) and  Internet (FDN) reasserting their devastating weakness also dragged down the stock market. Technically, the Dow has made a new record level of 16,606.15 this morning, while the S & P 500 hit a record high of 1,893.80. However they pulled back immediately after hitting new highs . They are now only down approximately 0.20% Vs the Russell 2000 and the Nasdaq falling by about 1%. These four indices are diverging again. Despite the major market indices are still above their 50-day moving average and maintaining their up trends, however if the Russell 2000 and the Nasdaq Composite continues with their weakness, the overall market will follow. The main focus for today is Dow support at 16,500, falling below this level will lead to even greater stock market decline.

Momentum stock performance today:

 


 

Social Media, Biotechs And Internet Sectors Are In Trouble Again

After bouncing  3 days and regained about 1/2 of their recent slide, Social Media, Biotechs And Internet sectors are in trouble again. They all reversed to the downside and formed Dark Cloud Cover reversal bearish patterns. They are the drags to the general stock market today.

Mid-Session Market Comment 04-01-2014

Major U.S. market index rose at the open and have been pulling back, but still maintaining good gains.  The stock market has been up in spite of Most Chinese, European and U.S. economic data released this morning are weaker than expected. Reasons may be that investors are expecting China will soon introduce new economic stimulus measures and the U.S. Federal Reserve Board's will likely continue to maintain low interest rates . Technically, the S & P 500 made a new intra-day record 1,884.60 this morning while the Dow rose to only 22 points to record highs. However the two indexes have now retraced about half of the morning gains. Nasdaq Composite is the strongest performer among major indexes, it is still up more than 1% and regained above its 50 day moving average 4222. It seems institutions are in buying mood during this first trading day of the second quarter. However, before the important non-farm payrolls report on Friday is released, investors will likely remain cautious. If the S & P 500 after hitting a record high go negative at the close, a top again is made and the market will fall again.