The Third Light Switch Moment

The first "light switch" moment was NFLX last week. The second was yesterday's post-Fed sell off. The third was the Facebook (FB).

The Facebook turned in some great numbers -- and sold off after it had rocketed 15% in the after hours session. This morning it was down 4% in the pre-market, but is bouncing.

The way the market is taking news suddenly means that, as Neiderhoffer would say, form is changing. Good news is now bad news. As was noted yesterday, be on guard for the unexpected.

There was not not any technical damage done to the S&P yesterday, but it was likely psychological. The key level now is 1770.48. Should the market get above that without first making lower lows, higher highs are still probable, but would most likely come in the form of wedge patterns.

Wedge patterns are usually terminal, meaning they terminate larger patterns.

I like the VIX here. It could poke below 12 if it wants, and I'd like it more. A/Ds flipped to nearly 3:1 negative after fading for weeks. It's reassuring to see that, eventually, internals really do matter, even in a Fed-stimulated marketplace. Once again, down volume exploded out of the SPY after if floated higher on fumes. And credit got smacked around pretty good, so this was not a simple one-off affair. Also, the dollar is higher. Still watching 80.50.

The key level below the market is the 1744.25 - 1745.50 level that I posted on Twitter/Stocktwits yesterday. It's a volume shelf. Below that level would likely blow the chances of the aforementioned wedge pattern.

One thing to note regarding the Facebook is that Forrester Research, a neighbor of theirs in Cambridge, Massachusetts, put out a report recently that was critical of the Facebook's marketing effectiveness. On the earnings conference call, Sheryl Sandberg noted that they weren't closing deals with large marketers as fast as they would like. In my opinion, shrewd investors put both data points together and chose to shoot first and ask questions later.