Things you need to know
- Vlad takes and global leaders launch sanctions
- Global Markets are higher this morning…. a bit oversold?
- There is still a chance at diplomacy – will Vlad consider it?
- S&P bounces off the January low…we need to test it one more time
- Try the Pollo Agrodolce
Good morning, good afternoon, or good evening…. Global stocks took it on the chin again yesterday as investors attempted to assess Vlad’s latest move. Was this the beginning of the end for Ukraine or is everyone over reacting? By now you know – Vlad has taken (recognized) the two breakaway regions of Ukraine – and sent in ‘peacekeeping’ troops to calm everyone down…. But the ‘peacekeepers’ only caused global leaders to initiate the sanctions that they promised.
Germany delivering the biggest hit (after European markets had closed) – by halting the ongoing certification of the Nord Stream 2 pipeline – the pipeline that would deliver natural gas to Europe and solidify Vlad’s position as the ‘suppler of choice’ to Europe. In response – natural gas prices spiked by 11% – which will hurt Europeans – but Olaf Sholz (German Chancellor) had warned of this response and then followed through. Joey, on the other hand, did initiate the US response – which was described as impotent – and that contributed to the ongoing selloff as the threat of war becomes the latest wild card for investors to consider. By the end of the day the Dow gave up 483 pts or 1.4%, the S&P gave back 45 pts or 1%, the Nasdaq lost 166 pts or 1.2%, the Russell lost 30 pts or 1.45% and the Transports gave back 234 pts or 1.6%. The 10 yr. treasury ended the day yielding 1.96%.
If you’re keeping scorecard – the Dow is now down 7.5% ytd, the S&P kissed correction territory (10%) and then rallied back a bit to end the day down 9.68% ytd. The Nasdaq is off 14.5%, the Russell is off 11.8% and the Transports off 10.5%…. Of the S&P-190 of the 500 names are off more than 20% and 50 names down more than 30% – so 40% of the index is in bear market territory.
Yes, we did get some economic data and while it was inline it did little to help the markets…as discussed yesterday – I told you that under the circumstances – it wasn’t going to make a difference to the broader markets – they were geared up to end the day lower and they did. Markit Manufacturing PMI was better than expected at 57.5 (solid), Market Services PMI at 56.7 (again solid) and Markit US composite PMI of 56 (and solid again). But remember – trades are always two sided…. there must be both a buyer and a seller…so while stocks got hit – it’s because of all the uncertainty – Fed uncertainty, geo-political uncertainty, policy uncertainty…right? Buyers are alive and well, they are just choosing to be patient and ‘non-aggressive’. They recognize that the panic in the markets will cause the algo’s to send in waves of sell orders with little to no regard to price….so let’s take advantage of that. Again, why would you pay $50 if the seller is willing to sell it at $48 or $46? So yes, it feels ugly, but this too is ‘transitory’ and if you have time on your side – there are some great bargains to be had – you just need to do your homework.
There wasn’t one sector that got spared yesterday…. Consumer Discretionary – XLY continues to get slammed down 3%, Basic materials – XLB down 1.4%, Energy XLE – down 1.6%, Tech – XLK down 1%, Communications – XLC down 1%, Even the Value trade got hit – down -0.8% as the tone was to just throw everything out. Now if you played it from the short side – you won…. DOG +1.4%, SH + 1.15%, PSQ +1%, SPXS +3% and if you hedged your longs with these shorts – then you ended the day flat (which is a win)!
Ok – this morning – the tone is clearly different…. global markets all higher…. US futures are up this morning…. Dow futures + 175, S&P’s up 27, the Nasdaq up 135 pts and the Russell up 14 pts. Asian markets ended the day up between 0.6% – 1%. European markets are up nearly 1% across the board as their trading day gets underway. Analysis of the first round of sanctions continues, Joey assuring us that his first response was not his final response…. while European leaders do the same. Remember what I told you yesterday –
The American Association of Individual Investors (AAII) has bears at 43% and Bulls coming it at 19% – which means what? It means that we are gonna get a strong snap back rally – AT SOME POINT – (and it could be today…) Why? Because when bearish sentiment gets this out of whack it is a ‘contra indicator’. But you need to pay attention to the noise to help figure out when that contrary opinion is about to happen. Again, the geo-political noise will cloud the action until we get more clarity.
Does it appear that we have some clarity now? Vlad made his move and now we have made ours…. the ball is back in Vlad’s court – Will he continue the invasion route, or will he choose diplomacy? At this point – it’s about everyone saving face, right? You can’t expect Vlad to just turn around without getting assurances that NATO will retreat. You can’t expect European/US leaders to turn around without assurances that Vlad will pull out. Everyone needs to play nice in the sandbox –
Now- let’s talk about the Elephant in the room – China? Xi Xi has been noticeably quiet – not supporting either side (out loud), but clearly watching to see how this plays out – because don’t kid yourself…Taiwan is in his sights…. he has already said it, he has made it clear that Taiwan is not a separate country, and he intends on taking it back. And this is the real geo-political issue that is simmering on the back burner. Again, I would say shame on us and the rest of the world for allowing Taiwan to take on the role it has. If China takes Taiwan this whole Russia/Ukraine issue will look like kindergarten…. So, I would say – get ready – because it IS coming…. I only hope that the administration has a plan……
Oil – took a breather after trading as high as $96/barrel…. ending the day at $91.90…. this morning it is off 50 cts at $91.37….as trader types ring the cash register after its explosive move higher over the past 4 months. Talk of Iranian oil hitting the market is helping to push oil lower – but it is just talk, it has not happened yet….and talk of Joey releasing more oil from the SPR (Strategic Petroleum Reserve) is also being credited to pushing oil down. Neither of which I am buying…I just think its some profit taking
The S&P closed at 4304 after testing as low as 4267…. – only 40 pts from the January 24th low of 4222….a level I have been calling for……as we needed to retest….when it got there I expected it to hold and it appears as if it is…but I would expect that we test it a third time before I am completely convinced….We have been talking about this….so now it is happening….no one should be surprised.
Remember – stick to the plan. Call me to discuss.
Take Good Care
Chief Market Strategist
kpolcari@slatestone.com
Pollo Agrodolce
You need: Chicken pieces – legs, thighs and breasts, olive oil, s&p, diced onion, chopped carrots, chopped celery, plenty of sliced garlic cloves – 6+, quarter cup of sugar, 1 c Chianti, ½ c red wine vinegar, ½ c orange juice with pulp, *sliced almonds – optional.
Season the chicken pieces with s&p – set aside. In a heavy frying pan – heat up some olive oil, – now brown the chicken on all sides. Remove and place on a platter.
Now add the garlic, carrots, celery, and onion – sauté for 10 mins on med heat…. Now add the sugar, wine, vinegar, orange juice, and almonds…. bring to a boil – add back the chicken – skin side up. Place a lid off center and turn heat to simmer. Cook for about 30 mins.
Now remove chicken and place on a platter, – turn heat up to high and stir until it is nice and thick…not long…like 4 mins max…. taste – adjust seasoning with s&p. Spoon the sauce over the chicken pieces and serve.
This dish works well with a green veggie – like French cut green beans or broccoli. Make a large mixed green salad with tomatoes, red onion and cucumbers. Dress in a balsamic Vinegar and Olive oil dressing. Keep it simple – as the chicken and marinade carry the dish.
Buon Appetito.
