Saturday we're still seeing sort of geopolitical 'road-rage'. Putin refuses to reform his way of embracing modern age conceptions of relations; remaining hard-headed with regard to nothing less than a destiny proclaimed in Putin's personal 'manifesto'. If you take that at face value; he'll invade and it might be remembered as the last bastion of last-Century brutish bullying.

In actuality President Xi of China could claim bullying titles on his own people, but they have been far more clever in recent years as far as pretending they are communist, when in reality they are a crony-capitalist autocratic state. All this activity seemingly reflects what could be 'long-Covid' in world leaders (a hallmark of that is 'brain fog', almost plentiful even among market pundits). In fact some are arguing Index percentage drops rather than key collapses.

Besides all that, the mega-caps have selectively been bludgeoned enough to set up tech-stock interim bottoms; but so many market managers are focused on the pandemic-theme stocks; which would bounce but not make new highs. So I think (as I have for over a year) that downdrafts in the big stocks remain a greater concern; although the market psychology dampens the small stocks since 'demand' for stocks is indeed ebbing-and-flowing one way or another.

Executive summary:

• The basic 'Bear Market' technical structure evolves, with seasonal efforts to stage rebounds (within the bearish context) deflected given 'events';
• I have flagged FANG / Mega-Cap overvaluation and crypto vulnerability, really for over a year; and despite 'just' a 10% S&P decline; you actually had a 'crash' in many of those mega-caps; with a handful more to come;
• The 'events' are not necessarily exogenous as relates to the Fed; and as relates to 'Ukraine', the prospects are variable 'even if' they do invade;
• Prospects for invasion are about two-thirds or even higher; especially with Putin 'personally supervising' nuclear missile tests' on Saturday (affirms a continuing belief he can bully his way to achievements; perhaps he can);
• I would say as things stand Putin actually unified NATO, which he disdains, and lowered the prospect of Ukraine being admitted,which he wanted;
• Everyone should declare victory and go home; even if Russia occupies a part of the 'Donbass' (Eastern Ukraine region); however that's unlikely;
• The other prospect is a 'blitzkrieg' invasion capturing Kiev quickly; which could work, but (and Putin may not grasp that if he really believes people prefer a Russian bias) there's a downside to that;
• Russia would be unable to occupy the entire place without a great deal of bloodshed, among very similar people who do business with Russia on a regular basis; so instead of being enhanced that would be jeopardized;
• As to the markets, they say 'sell when the canons roar, and buy when the trumpets sound'; well it's not that simple because this market is so tricky, the market will likely be up and away short-term 'if' there's no war;
• Beyond that, other concerns like Oil prices and their inflation relationship of course prevail; and I expected Oil to retreat a little, not a lot and then it would firm again; how it behaves short-term relates to Russia and Iran;
• Resolving the Iran Nuclear Deal (or reviving) would only impact Oil very briefly, as demand is still strong and it's just one of three considerations at the moment: Ukraine/Russia/EU sale; Iran deal; and global demand too;
• A token containment of the Fed by regulations prohibiting ownership by a Fed President or certain other levels of officials, of any individual stocks or bonds; and that extends to sector ETFs aside index mutual funds too;
• This continues next week; watch Oil prices and S&P futures on Monday (as Europe and Asia will be open) for an idea; although if Putin's armor sweeps into Ukraine from 3 directions; you'll know the implications;
• As to: 'sell on the cannons; buy on the trumpets'; we'll assess that later; at the same time it's not always clear;
• After Pearl Harbor the market worked to a lower level until we sunk their carriers at the Battle of Midway in 1942; that success cemented the fate of the Imperial Japanese Navy; marking the S&P bottom during WW2;
• No military conflict since, has roiled markets so specifically; unless you're to consider the Oil War against the United States during Carter's term; as had incredible impact (I had warned of the Saudi's using the oil weapon as long as I could remember);
• That finally led to the U.S. starting to reassert energy independence, which any nudnik now sees the importance of (a decade or so hence we'll see more clean energy; but clearly not as fast as some have envisioned it, and certainly not reliable in the present situation, especially for the EU, which is exactly why Putin thinks he has the EU over a 'barrel' (of his Oil).

In sum: 

Putin is all about power & money; and he wants Ukraine as his legacy. So we shall see if he regrets being smashed financially; nor the funds to occupy their neighbor more very long; nor repair the damage to Russia's image as long as he remains Czar, while his people suffer. Most would rather align with the EU I'll bet; and not have their country turned into a gigantic economic gulag which Putin thinks he'll avoid due to high Oil prices. But now nobody will trust him in dealings, which is his mistake. Whether Trump was too friendly with Russia or Biden(s) had their fingers in Ukraine's cookie-jar isn't clear; but it should have told Putin he could accomplish more with humility than boorish arrogance.

There is no change in the overall views and sensitivity to oil prices too. Russia is a huge energy producer; so if there is 'war', Oil will thrust higher. This is not possible to entirely evaluate, as it could be concurrent with a 'nuclear deal', so to a minor extent that, or more Oil from Saudi Arabia (not from the U.S.) to the EU could be forthcoming.

Saudi reticence is nonsense considering their dire position if not for the U.S. being in the region militarily. Russia is a major supplier of oil and gas to the European Union, making the current situation all the more complex. The U.S. is shipping Oil and especially LNG to Europe (mostly Germany) and while it's fine, the logistics are just as efficient if not more so from the Persian Gulf.

The Saudis (no offense, but typical of how they play) want a quid-pro-quo that relates to military assurances I suspect (they are not exactly winning much in the protracted war in Yemen); and the irony is these are the same Saudi's that were so opposed to American presence before and during Desert Storm.

Anyway, I expect Oil prices to remain firm; and this does have implications for stocks as well as how the Fed 'perceives' inflation trends. However, you'll not likely see Oil so low as it was more than a year ago; fundamentally that won't occur, even if there's a brief shakeout related to a potential Deal with Iran.

Deals with the devils aside, we have a valuation quotient in this market which continues to be excessive with most of the mega-cap stocks, tech included. It is still bifurcated, and for whatever reason (behavior of money managers), we have big-caps and small caps-ebbing and flowing mostly concurrently.

We see plenty of speculative valuation opportunities in smaller-cap disruptive stocks (which may or may not ever work out), and also in some big-cap stock moves that differentiate themselves. Ford (F) is one of those, talking about likely spinning-off their EV operations as a separate company.

That's not so easy as products are being made at existing facilities; but pretty good idea in a sense. 'Pure' EV could help them be perceived differently; with a general value to existing shareholders likely significant although unspecific at this point. Not bad I suppose as the Ford family retains a huge stake.

Bottom line: the basis of this Bear Market is the wide dispersion between the mega-caps we often outline and under-appreciated next-generation stocks in novel or new themes or directions for a lot of such companies. We view a few with guarded optimism, but no certainty; because sentiment is varied as these recent days have shown.

So long as heaviness prevails in big stocks and everyone seeks shelter while the mega-caps rotationally break lower, combine an aggressive Fed and that's pretty heavy as obstacles to advance meaningfully, yet. Combine Ukraine and the short term can be very volatile (even in either direction) on the outcome.

There's a dichotomy between what Russia wants; Europe struggles to realize what's happening; risks of destruction to Western systems by cyberattacks as well as another risk: a land-war in Europe promoted by one man who ensures he has already damaged the image of his people and their future regardless.

Meanwhile the S&P plays 'ping-pong' with stocks up and down; mostly down. It remains a treacherous market going into a 4-day trading week coming up.