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.

Mid-Session Market Comment 03-27-14

 Major U.S. market index fell this morning,  then bounced, and they are now trading mixed. Fourth quarter GDP came in +2.6% better than the last estimate of  2.4 percent  and  the reduction of initial jobless claims both serve to stabilize stock market. Technically, the Nasdaq Composite and Russell 2000 have both dropped below their 50-day moving averages yesterday, their trends have turned down . However, the two indices have fallen five days in a row, and are oversold. After dropping to near their 100-day moving averages this morning ,they are now bouncing off those levels. A short term oversold bounce for the market is likely.  The Nasdaq may go back up to test its 50 day moving average at 4223 before coming back down again. S & P 500 fell below 1850 support this morning and has since recovered above it. This should also helping the rebound. The Dow is up now and have been the strongest among indexes lately. It's trend is still up. Social Media sector (SOCL)should lead the bounce.

Today's Technical Damages For The Stock Market

Today's technical bearish factors for the stock market:

1. Russell 2000 sell on morning rallies for the 4th day.

2. Nasdaq Composite breaking below 50 day moving average.

3. Tail reversal for the S&P 500.

4. Transportation index dropping big today - diverge with the Dow Jones Industrial Average.

Mid-Session Market Comment 03-25-14

Major U.S. market indices soared this morning and have been dropping since. They are now trading mixed with the Nasdaq Composite and  Russel 2000 down and the Dow and S&P 500 slightly up.  European stock markets rose across the board is positive to U.S. stocks. Consumer confidence index better than expected also helped. However rising market attracted selling and has led to rapid retracement. Previous high flying stock sectors such biotech IBB, Internet FDN, social media SOCL and solar energy TAN are all targets for selling. Technically, major market indices fell over the past two trading day and are forming topping patterns. Both the Nasdaq and S & P 500 were able to hold supports in yesterday's trading, these supports are 4220 and 1850 respectively. These levels  are going to be the levels of contention between bulls and bears today. If these two levels are violated to the downside, more serious market down turn will be likely. Based on  recent weak market performance there's a good chance this will happen. S & P 500 support is 1850 and 1832. 

Bullish Percent Index Issued Sell Signal For Nasdaq 100 And The Nasdaq Composite

First a tutorial:

Bullish Percent Index (BPI)   is a  market breadth indicator that is calculated by dividing the number of stocks in a given group (an index ,an exchange, an industry, etc.) that are currently trading with Point and Figure buy signals, by the total number of stocks in that group.  BPI can be used to determine overbought/oversold conditions and can generate buy/sell signals. It moves between 0 and 100, however it rarely goes below 20 or over 80. Followings are the how it can be used in trading :

Bull Alert when BPI is below 30%, oversold
Bear Alert when BPI is above 70%, overbought
Buy signal when  BPI go above  30% from below
Sell signal when BPI go below 70 % from above

The $BPNDX is a Bullish Percent Index for NASDAQ 100 Index ($NDX). It shows the percentage of stocks with current Point and Figure Charts buy signals inside the index . The following is a most recent $BPNDX chart shown with $NDX created by Greg Schnell and published in shortsideoflong.com. The following chart demonstrated the accuracy of BPI sell signal and it is indicating we are having one now in the Nasdaq 100.

BPI for other popular indexes are as follows:

 

Mid-Session Market Comment 03-21-2014

Major U.S. market indexes soared at the open, pulled back and are now trading mixed. S & P 500 rose slightly above the previous high then fell back. The Nasdaq is down due to weakness in biotechnology and technology stocks. There is no significant positive news driving the market up besides the big surge in China's stock market by 2.72 %. However today is a "quadruple witching day," it's the last trading day for stock index futures, stock index options, stock futures and stock options. Today's stock market will be affected by artificial price manipulation and is subject to irregular fluctuations. As there is no particular good news, it is difficult for the Dow to break above 16500 level. On the other hand, we need to beware of  the S & P 500 reversal after briefly making new high this morning. If the S&P 500 closed down today, a bearish intra-day reversal will be formed and the market will likely reverse down in the near term.  Dow support is 16131 and resistance is 16500.

Bearish International

As the Dow Jones Industrial Average is trying to follow the S&P 500 and the Russell 2000 in making all time high in the USA, it needs luck as stock markets around the world are not helping.

The German market formed Double Top pattern since end of February 2014. Although it has been bouncing in the last few days but is facing resistance at its 100 day moving average. It looks like the bounce is over and it will be turning back down.

The UK market has been in a trading range since October last year and has been coming down to near the bottom of range. It may be ready to go under if it follow its European counterpart's performance.

The Japanese market is trading below its 50, 100 and 200 day moving average and is in a down trend. It just renew its downside momentum by dropping 1.65% yesterday. A big bad bearish Head and Shoulder pattern has formed.

The Shanghai stock index has been in a down trend for years. It has been struggling to hold the critical 2000 level recently but failed to do so yesterday. It is looking like it probably will accelerate to the down side from here.

The Hong Kong Hang Seng Index accelerate to the downside after it failed to hold its 50, 100 and 200 day moving averages. It failed to hold its February low yesterday and looks going lower.

Will the US stock market going alone to all time high ignoring the bearishness all over the world? We will have the answer very soon. But situation is not looking good.

Mid-Session Market Comment 03-20-2014

Major U.S. market indices opened with small losses this morning, they have been going back up and are now having  moderate gains. Since tomorrow is the last trading day for March stock index futures, stock index options, stock futures and stock options, the stock market may be affected by artificial manipulation which may cause irregular fluctuations. However, the Fed may raise interest rates sooner than expected and ​​President Obama signed authorization for a  series of new sanctions against Russia this morning should have negative impact on the stock market. Technically, the Dow found support near its 50 day moving average at 16133 and is bouncing but may find resistance at 16370. Since there is no significant good news in sight as trigger to make new high, the odd of the market coming down and correct is still high.

Closing Market Comments 03-19-2014

Major U.S. market indices opened with small gains this morning, they then trended lower and closed with moderate losses. Fed President Janet Yellen believe that interest rates will likely rise  in about six months after the end of quantitative easing. In her first conference with reporters after taking the seat of Fed chair, investors sensed that interest rate may go up sooner than expectation.  Besides selling stocks, investors also dump treasuries and gold as US dollar index rose the sharpest in months.  10-year bond yield soared 0.091% to 2.772%.  Gold dropped 28.20 to 1330.60 per troy ounce. These trends likely will continue in the near term. Technically, the Dow fell sharply today by  114 points after rising for the past two days, and a bearish outside day pattern on its chart is formed. The market will likely continued to come down in the near term. Dow support is 16137 and resistance is 16370.

More ETF Symbols

• Treasury ETFs: TBT, TLT, TMV, SHY, IEF, TBF, PST, EDV, TTT, TMF, ZROZ, SBND, TLH, IEI, DLBS, TYO, DTYS, VGLT, BIL, UST, SHV, UBT, TBX, VGSH, TLO, VGIT, SCHO, GSY, DTYL, SCHR, LBND, ITE, TENZ, TYD, TYBS, DTUL, SST, DTUS, TUZ, FIVZ, DFVL, TBZ, DLBL, DFVS, TYNS
• Gold ETFs: GLD, IAU, PHYS, SGOL, UGL, DGP, GLL, DZZ, UGLD, DGL, GLDI, DGZ, AGOL, DGLD, TBAR, UBG, GLDE, GYEN, GEUR, GGBP
• Dollar ETFs: UUP, UDN, DBV, FORX, UDNT, UUPT, USDU
• S&P 500 ETFs: SPY, IVE, SH, SSO, SDS, IVV, VOO, SPXU, UPRO, RSP, RWL, EPS, IVW, SPYG, RPG, RPV, SPYV, BXUB, VOOG, VOOV, TRND, SFLA, BXUC, BXDB, FTA

Mid-Session Market Comment 03-18-2014

Major U.S. market indices opened up this morning, pulled back and are now holding with most of the morning gains. Putin said he does not want to split Ukraine further drives stocks higher. But U.S. Vice President Joe Biden said the Russian move is like land grab and is working with European countries for more sanctions on Russia. Despite the tension in Ukraine is calming down a bit,  it could flare up again at any time. China's economic slowdown worries , major European stock markets forming double top patterns and investor sentiment too bullish are negative factors for the market. Technically, the Dow rises sharply for the second day and is climbing towards resistance 16500 level.  This level is not easy to break without good news. The Dow may turn around as it gets near this level. Dow support is 16141 and resistance is 16500.