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Jeff Saut: Stocks Ignore 'Grave' Concerns in Ukraine, but Correction May Not Be Over


Something continues to feel not right about the markets.

Yesterday, the S&P 500 (INDEXSP:.INX) and the Dow Jones (INDEXDJX:.DJI) both saw gains despite comments from President Obama about the situation in Ukraine.

Having lived inside the DC beltway for years, I have better than a working knowledge of the beltway's jargon. When the president of the United States historically has used the word "grave," things have been really serious. If you study the use of that word, you will see what I mean. So when President Obama stated on Monday that he had a "grave concern" about what is occurring in Ukraine, I took the situation as pretty serious.putin ukraine

Of course, said situation was amplified when a Russian fighter jet buzzed our Navy's destroyer, the USS Donald Cook, in the international waters of the Black Sea over the weekend, and did so not just once, but several times. That encounter poses the question, is this simply the stupid incident of a young officer, or a provocative order by Putin?

Recall that Russia gets most of its ICBMs, as well as many of its jet engines, from the eastern Ukraine and does not want it to slip into the pro-West camp. Moreover, Putin is taking / has taken calculated risks to divert his population's focus from the fact that the Russian economy is collapsing. Rather, he is attempting to refocus attention on Russian nationalism, and the reunification of the Russian empire.

Yesterday, however, the US equity markets ignored such events and rallied. That rally lifted the S&P 500 back above its overhead resistance zone of 1835-1840, which raises the question, is the correction over? While I would like to think so, something continues to just not feel right to me.

Neither does it feel right to the sagacious Jason Goepfert, who writes, "The tables ... show the historical returns during the next three months for the S&P 500 when we enter the seasonally weak period in Year 2 of a presidential term, followed by the returns when we enter the seasonally favorable period. For 2014, the weak period will begin on May 7, and the strong period will begin on September 30."

That said, in this business price is reality, and with the S&P 500's close above 1840, I am recommitting some capital here; but I will feel a lot better if the S&P can clear 1860.

Some names that are rated Strong Buy by our fundamental analysts and play to my improving economy, and thus transportation, theme would be Swift Transportation (NYSE:SWFT) and Knight Transportation (NYSE:KNX) with KNX breaking out of a massive base formation. This morning, the futures are stronger with no "grave" news out of Ukraine and as China's Q1 GDP rose 7.4% vs. +7.3e, while retail sales, industrial production, and fixed asset investment met the targets.
No positions in stocks mentioned.
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