Be Careful of Wishing

Wow! One of the great maxims in life is: “Be careful about what you wish – you just might get it.” Well, on Friday, I wrote the following.

Will March and April bring May flowers? It all depends on the economic data, Russia, and the Ukraine now that the earnings season is winding down. I am not so sure I won’t get my wish for a market pullback so I can buy some more.

Today, the market is down hugely and the reason is, apparently, the geopolitical strife in Ukraine.

Global equities were sharply lower at the time of writing as investors headed for the safe havens after Russia upped the ante in Crimea.

After Friday’s strong market movement, the bulls were coming out to push the market higher. The problem is these technicians only see the numbers on a chart. The real world is happening out there and it cares little for the numbers on a chart.

That fact that today’s volume [Friday] – bullish volume – was the highest it’s been since February 7th also tells us the majority of investors believe in this breakout.

True, the S&P 500 smashed through the 1848 ceiling on strong volume, but it is also true that Russia has become bellicose and it has moved its military might toward Ukraine.

Okay, so I got my pullback, sooner rather than later, and what am I doing? I would like to buy more of my trades, but the funny thing is they are all up substantially. Currently, I am trading in the fuel-cell arena, and it appears this area is really hot right now, even in the face of today’s bearish onslaught. Nevertheless, I have triggers set for my trades in case they roll back and I have other picks targeted to buy when they reach “the zone.” These will pay off when the market comes out of this latest news funk.

True, things could get worse over there in Eastern Europe, but will Russia risk its newly minted Sochi image with an outright attack on the Ukraine? It is hard to imagine this happening, especially with Putin suffering both political and economic problems in his own country. So, the last thing Putin wants to see is the following.

Rising tension over Ukraine slammed Russian financial markets Monday, prompting the central bank to hike interest rates as the ruble plunged.
Russia’s main stock market index fell nearly 13% as the country’s G8 partners condemned its military buildup in Crimea, demanding that it withdraw.

Then again, the man has demonstrated a common characteristic of all great dictators – he does what he wants to do, regardless of the consequences to his country. In any case, the market is reacting to the weekend news from Russian and Ukraine.

So, we wait to see how this all unfolds, but my money is on Putin backing off to protect his power. After all, all he has to do is look toward Ukraine to see what serious demonstrations can do to a country dictatorially run.

Speaking of dictatorial … Just a quick note on China, as the news from there this weekend is probably adding to the negative buzz in the market.

China’s HSBC manufacturing PMI fell to a seven-month low of 48.5 in February from 49.5 in January, while the official reading slipped to 50.2 from 50.5.

As always, though, there is more to the story than the headline numbers.

In contrast, official non-manufacturing PMI rose to 55 from 53.4. “We are seeing a higher share of services in GDP, and we cite that sometimes as one of the signs of rebalancing in the economy,” says BBVA economist Stephen Schwartz. “If that’s part of a longer-term trend, that’s somewhat encouraging.”

Actually, I believe it is part of the longer-term trend for China, as the ruling elite there have made it clear they want the economy to rely less on exports and more on domestic consumption. Creating a larger services sector is part of that plan.

Finally, here is weird headline from MIT magazine to pique your interest.