Hope your week is treating you well. The markets are absolutely nuts, but we'll make some sense of it today for you. Before we get into it though, speaking of nuts... did you happen to see how YELP traded in the last hour yesterday before earnings? Stock traded sideways for most of the day and then in the last hour of trading tanked on over $300K shares of volume when the stock only traded 898K shares on the day. Roughly 30% of yesterday's volume was traded in the last hour to the down side. Weak hands dumping into earnings? Maybe a little but I seriously doubt the bulk of that volume could be attributed to that. Classic market maker manipulation if you ask me. If you are more of a long-term investor and you like a Company, you can use situations like withYELPyesterday as a buying opportunity. I can't emphasize the importance of maintaining conviction and not letting the media or price action of a stock affect your decision to take a stand. From a trader's perspective, it's extremely important you educate yourself on how market makers work. There's plenty of good books out there on the topic. They have more short-term control over a stock or the markets than anyone else, so if you want to continue to profit as a trader, it's a must to know the ins and outs of how they work. Case in point, yesterday going into that last hour of trading for YELP, market makers tanked the stock in an effort to pick up shares on the cheap going into earnings. The Company reported blowout numbers and the stock is up almost five bucks off yesterday's lows. You can hate market makers or you can learn to use them to your advantage. The latter is much more productive and will help your trading prowess tremendously. Quick side note, don't get taking a stand confused with using a stop loss on an investing idea or when making a trade. It's critical to take your lumps when you're wrong, so don't get taking a stand confused with accepting a loss and moving on. While we're on the subject of YELP, we initiated coverage on YELP because we believe it's the best stock to own in the so called social media space. It turned out to be a good call because while companies like Facebook and others in the space continue to frustrate investors, YELP crushed their numbers yesterday beating analyst estimates on both the top and bottom line. The Company announced after the close yesterday Q2 revenue that surpassed analysts' estimates and a smaller-than-expected net loss per share, and revised the current quarter's and this year's revenue higher as well. Revenue in the three months ended in June rose 67%, year over year, to $32.7 million, yielding a net loss of 3 cents. Analysts had predicted $30.7 million and a 6-cent loss. CEO Jeremy Stoppelman commented that the company is "becoming the de facto local search engine for connecting consumers with great local businesses." He said Yelp was experiencing "an increase in our consumer engagement, especially on mobile." For the current quarter, the company sees revenue of $34.5 million to $35.5 million, ahead of the consensus $34.4 million estimate, and for the full year, the company sees revenue of $135 million to $136 million, better than the $128 million to $132 million average of analysts. We've been around the Web ever since it was commercialized and we believe YELP is one of the stocks that will change people's behavior regarding where to eat, where to shop and which services to hire among other things. From a valuation perspective, there's plenty of room for upside in the stock in the months and years ahead. Of course they need to continue to deliver and expand their footprint but there's nothing that suggests, at least right now, that the Company is going to have any problem increasing their market share and visibility going forward. The Fed, the ECB, You and I. So the Fed did nothing we didn't already know. The ECB did nothing we didn't already know. The media did exactly what we predicted. Therefore, you and I are among the smartest prognosticators out there right now. Last week, the markets ran toward the latter half of the week because the media said it was in anticipation of the Fed taking action as soon as this week. Wrong. Then, yesterday, after the Fed did nothing, they said the ECB was more important than the Fed now and that's why the major indexes didn't move much yesterday. Well, the ECB did nothing. Wrong again. Look, we've referenced this plenty of times now and if you want the real story, stick with me here. I'll start by pointing out that we're in a trader's market. This morning, futures were up early and financial headlines touted Mario Draghi's comments suggesting the ECB was going to take necessary steps to ease the Euro crisis. This is where it gets really funny, but not funny. Once the market opened, the major indexes tanked and before you knew it, Yahoo!'s Finance headline was, "Wall Street falls on Draghi comments, headed for 4th straight drop". See how overly reactive in nature that is? That's enough to cause any trader who relies on media headlines to make decisions to jump off a cliff! OK, so the markets tanked on the open, then staged a furious rally basically wiping out those losses, then has continued to move lower since. What's going on with the Fed and the ECB has absolutely nothing to do with these markets right now whatsoever. Not yet anyway. Here's why... I've included a daily chart of the S&P here for your review. Just take media headlines and throw them out the window for the time being. Ever since the June low, the pattern has continued to repeat itself regardless of what headlines hit the news wires on any given day. Every single time the S&P hits a low, it rallies to a new short-term high and stalls, it then moves lower, stalling at a higher low, then moves to a new short-term high, stalls and repeats the process all over again. That's not rocket science and if you've been following along, our contrarian approach to this market has been spot on. Short the highs, buy the lows, don't get married to your trades and you've likely made some excellent returns while this market tries to figure itself out. There's no reason to change the strategy now until proven otherwise. However, the key here is until proven otherwise. At some point, this pattern is going to change. It may be this week, it may be next week or next month. The important thing here is to know what to do when the pattern has changed. Once this trading pattern has been broken, here's a very real possibility... If the pattern is broken to the downside, which is where we've been leaning, the major indexes are likely going to move sharply lower and there are going to be a lot of people freaked out. Don't freak. We'll look for a logical level where the market may capitulate to the downside and provide what may end up being an excellent buying opportunity. Conversely, should the pattern get broken to the upside, we'll see just how much conviction the break is and determine if it's a head fake or not, thus giving us an indication to start jumping in for a new leg up or not. Eliminate the noise and things can make perfect sense. Until the Fed or the ECB actually does something, nobody cares. However, once they finally do take action, that will get digested. Then and only then will it matter to the market.