The stock market in 2014 has been challenging (for both sides) to say the least. However, the action of the last two days has been especially crazy. And while this market can and often does turn on a dime, we believe the message that seems to be emanating from all the volatility seen this week may be worth listening to.

Let's start with Tuesday's roller coaster ride. If one only looked at the closing numbers, they would have assumed that stocks had continued to bounce up from Friday's low. However, living through the day on a minute by minute basis was definitely a trip. Take a look at the chart below.

S&P 500 1-Minute Chart - Tuesday, April 15, 2014

If you will recall, stocks opened up strong on Tax-Day 2014 on the back of strong earnings from the likes of Coca-Cola (NYSE: KO) and Johnson & Johnson (NYSE: JNJ). These two bellwethers helped push the Dow higher by about 100 points in just a few minutes.

Then the headlines out of Ukraine started to come in. Eleven dead in skirmish. Jet fighters engaging. Helicopters firing. And then there was the video. In short, it looked like the Russia/Ukraine crisis was back.

The Rout Was On

As the trend-following algos fell all over each other trying to short, cover, and then get short again every half-hour or so, it began to feel like Monday's rebound was failing - miserably. And before you could figure out the spelling of the airport in Ukraine under siege, the S&P was testing Friday's low while the NASDAQ, Smallcaps and Midcaps were collapsing under the weight of renewed selling in the bears' new best friends: Biotech, Internet, and Social Media.

Just before lunch, the Dow had fallen 200 points from the high and was sporting a triple-digit loss. To be sure, things were looking u-g-l-y.

But... just about the time CNBC had created a new flashing ticker informing us that the NASDAQ had just entered a "correction" (to which I responded loudly with something akin to "Duh!") there was news out of Japan.

Weak Data From Japan

I'm not exactly sure whether the news was an official release or just "trader talk," but the word was that weak economic data from the land of the rising sun was leading to talk of more "Abenomic" stimulus.

And what does the word "stimulus" mean to big banks and hedge funds? That's right; QE. Free money. And the mother of all carry-trades!

Boom. The reversal was on. The yen fell. Shorts covered. The algos went the other way. And within a couple hours the Dow had moved up 200 points from the bottom. Why was this happening, you ask? Oh, that's right, because everybody who can borrow money in Japan at 0 percent loves any and all talk of additional stimulus. So, stocks were bought and everyone who owned equities went home happy.

Wednesday's Edition

Wednesday started out with a continued pop to the upside (leaving a gap on the chart of the S&P 500). This time it was China's turn to talk about stimulating their economy. China's GDP came in at just 7.4 percent, which represented a pretty significant dip from the 7.7 percent rate seen in the fourth quarter of 2013.

In response to the weak GDP numbers, Premier Li Keqiang was quoted by state media as saying that China would reduce bank reserve requirement (yep, that's a form of stimulus) for the second time in as many weeks.

As you might suspect, this gave the bulls something to cheer about and stocks opened higher on Wednesday. However, almost like clockwork, the sell algos kicked in after 3 minutes and once again, it looked like the bears meant business.

Then Came Yellen

Then Janet Yellen started talking. First she said that inflation isn't going to be a problem for a while. Then she said that it would take another two years for employment levels to recover. Next, she said that the economy would continue to need some help for a considerable length of time. And finally, she blamed the recent economic weakness on the weather.

The key here was the Fed Chairwoman did not produce any surprises. Nope, she reaffirmed the idea that ZIRP (zero interest rate policy) was going to stick around for some time yet. Which, of course, means more free money for the big banks and hedge funds to play their carry trade games. Party on Wayne!

What It Means

Again, we need to understand that the algos are in control of the game these days - especially these days. However, let's review what we've heard over the past two days.

But over the last two days, we heard that Japan may be talking about more QE. We heard that China is starting to lean toward stimulative measures. And we heard that the U.S. Fed is staying dovish.

What does it all mean? It's simple, really. Unless some new issue crops up like a shiny object to distract the A.D.D.-afflicted algos (and to be fair, earnings from Google and IBM may do just that), ZIRP and QE trump concerns about overvaluation in the mo-mo names - especially after the internet, biotech, and social media stocks have already taken it on the chin.

In closing, let me reiterate that this market is more than a little nutty right now. There is little memory from one day to the next. There is a ton of volatility. And as such, trying to maneuver is difficult to say the least.

But for quite some time, the stock market game has been all about the free money provided by the central banks of the world. So, the message to take away from the hysterical moves of the last 48 hours is that until the bears can come up with a really meaningful move to the downside on the Dow and S&P 500, buying the dips may be the way to go. Or not. Which, of course means that you'd best pay close attention to the price action in the coming week or so. Remember, the damage done to the former leaders is significant and may not be over. So let's be careful out there.

Publishing Note: I am traveling on Monday and will not publish a morning report. Here's wishing everyone a Happy Easter.

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Turning To This Morning... Once again, tensions in Ukraine, which appear to be escalating, dominated the overnight news flow. However, traders appear to be more focused on earnings from the likes of IBM and Google (which weren't great after the close) as well as the results from GE, DuPont, and Goldman Sachs (which were largely better than expected) this morning. Overseas markets were fractionally mixed and U.S. futures are pointing to a modest decline at the open on Wall Street.

Pre-Game Indicators

Here are the Pre-Market indicators we review each morning before the opening bell...

Major Foreign Markets:
- Japan: +0.00%
- Hong Kong: +0.28%
- Shanghai: -0.29%
- London: +0.06%
- Germany: -0.06%
- France: +0.08%
- Italy: -0.42%
- Spain: -0.17%

Crude Oil Futures: -$0.02 to $103.74

Gold: +$0.50 at $1304.00

Dollar: higher against the yen, lower vs. euro and pound

10-Year Bond Yield: Currently trading lower at 2.645%

Stock Futures Ahead of Open in U.S. (relative to fair value):
- S&P 500: -3.56
- Dow Jones Industrial Average: -36
- NASDAQ Composite: -17.75

Thought For The Day...

Keep a green tree in your heart and perhaps a singing bird will come. -Chinese Proverb

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The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of StateoftheMarkets.com and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. One should always consult an investment professional before making any investment.