Market Briefing For Monday, Feb. 14

A 'Bear Market' in a blink  was an opportunity to 'get in' key stocks, briefly in late 2018; especially like our AMD way down around the ~16 area. During the preceding slide, a number of stocks plunged proportionality and rather rapidly. Perhaps there's a lesson here; of what can happen when the Fed inopportune meddling with fire (rates), occurs during rapid inflation, Covid that's not quite a post-pandemic event in much of the world, while war threatens concurrently.

Knee-jerk selling 'now' ahead of both a Monday interim FOMC meeting, and on top of everything that includes the S&P being rebuffed from just about where the rebound was targeted to go. 

I doubt Putin 'really' wants to decapitate the Kviv (or Kiev; the Russians and the Ukrainians say it slightly differently) leadership amidst the Olympics; although it makes no sense to amass such formidable forces unless he plans to use them. It's absolutely a crisis manufactured by Putin and one of his top Generals that he tasked with the responsibility of strategic planning.

Its execution is already determined. I suspect Putin's 'manifesto' on Ukrainian history documented in a version of events, sent to 'every' Russian soldier this past Summer, pretty well explains Putin's goals to reconstitute greater Russia. As you know Ukraine was not exactly occupied in the same way as European 'satellite' countries the Soviets conquered; but it did acquire independence. In this sense Putin may be trying to convince or generate interest in a 'conquest' of Ukraine, since popular support 'in' Russia for aggression is minimal; most Russians would rather plan holidays to France or Italy than engage in conflict. Not to mention the lack of Oil revenue and economic retreat that will follow.

If this war happens, who wins? Actually none of the involved parties. Maybe it will be China that flourishes as Europe will be focused on Ukraine/Russia; the USA will be focused on fighting the Fed, inflation and mid-term unruly politics; while China will be focused on economic recovery and vanquishing Covid. In a sense this entire situation, especially Putin's intransigence on it, probably is a goal he wouldn't dream of if not for the world's repressed pandemic status. I will resist temptation to connect 'the fog of war' with 'post-Covid brain fog'.

All of this is not market business as usual. And contrary to what some pundits say; it may have been timed (St. Louis Fed President Bullard's comment) to coincide with S&P upper-limits of what would be a projected normal rebound. Combine everything else and it's a 'Chop Suey' market risk; everything stirring but not yet 'fried', although if war occurs, it risks briefly plunging 'in a blink'. In a sense that's what happened in late 2018; something like that's feasible. (In the overly-technical chart, note S&P is about 100 handles lower than shown.)

'Weaponizing Oil' . . is often discarded as a prospect by myopic analysts, as proper energy analysts grasp what this is about. As one of the world's largest supplies or both Oil 'and' Natural Gas; that not only gave Russia leverage with Europeans; but also means lower revenue to Russia if exports are blocked.

Oil prices clearly scream higher over 100/bbl 'if' Russia moves as speculated, and while temporary that's going to trigger hunkering-down everywhere. Here in the U.S. because retail gasoline prices will rise over 5/gal for premium while in Europe general tendencies to stay close-to-home during such a (fiasco?).

Moscow is not accepting whatever has been offered 'by the West', so Putin at this point needs to be taken seriously, and include a better understanding (as so often has been obviously lacking) of the history of Ukraine itself, and totally the understanding of Crimea as being a part of Russia that Khrushchev gave to Ukraine as a 'gift', without ever contemplating Ukrainian independence as a then-solid Soviet Union prior to its later collapse.

 

 

Bottom line: Recognize that S&P was call to press 4600; but needed a better backdrop than hawkish Fedspeak to temper the bears. Also 'pushback' from a couple other Fed Presidents wasn't the focus on Friday due to war fever that's overriding everything.

The whole combination is a cluster-'fridge'; chilling efforts to improve the overall market's position at a crucial technical level. It can break lower and then you'll have a 'C' wave on an intermediate basis (I certainly don't usually focus much on 'waves', as they are not particularly predictive; but do matter when broader issues impact fundamental prospects; then the psychology of waves appears) and that can lead to a washout low; but for now much depends on.. Moscow.