Todd Harrison: Putin Offers the Stock Market a Russian Reprieve
Equities break out -- but will it last?
Turnaround Tuesday arrived and, on cue, and the world flipped its lid.
War was peace. Down was up. Red was green. Heck, even Juan Pablo had some pep in his step.
The catalyst, of course, was the softer side of Vladimir Putin, who dialed back his rhetoric and said there wasn't an immediate need for Russia to invade eastern Ukraine.
It was the first constructive sign offered by the Russian president since the escalation began, and while he reserved the right to use military force to protect ethnic Russians, he said there is currently "no such necessity" and it would only be a "last resort."
Is this the end of the most serious standoff since the Cold War, or a stall tactic as Crazy Ivan determines his next move? To borrow a quote from my favorite history teacher, "I don't know," and to that end, the stock market didn't care.
The S&P 500 (INDEXSP:.INX) and Russell 2000 (INDEXRUSSELL:RUT) busted through 1850 and 1182, respectively, and the bulls launched a full-scale assault that triggered the massive breakout we were all over last week.
Of course, there were bulls that were positioned for a rally and got shaken out by the geopolitical crosscurrents on Monday. In hindsight, I suppose we can call that a fumble-ruski, and they reached higher yesterday to climb back aboard the Matador Express.
They know, through a pure technical lens, that the pattern "works" toward S&P 1960ish.
That's not to say that we're back in a Utopian environment given the signs of froth that surround us. One day we'll look back at this juncture with a knowing nod and an all-too-familiar feeling.
I don't care how many burritos were sold between Monday and Tuesday, it wasn't worth an extra $940 million in market capitalization for Chipolte Mexican Grill (NYSE:CMG).
A few words to the wise as the masses gather to sing Kumbaya. The three charts below scream "not so fast," at least not yet.
The first is the Russell 2000, after the stunning 3% move yesterday.
The second and third are the banks and transports, neither of which have confirmed the new highs.
They won't matter unless we turn lower -- if they turn lower -- but we strive to see both sides, and now we do.
- Bloomberg is quoting the Chinese premier saying that "China will safeguard the victory of World War II." Where is Jack Bauer when we need him?
- Terrific Bitcoin panel with the folks at MarketWatch yesterday. We'll be sharing the coverage on Minyanville as it rolls out.
- Liquidity is the "other side" of volatility, we know, and the VXO (INDEXCBOE:VXO) isn't a timing mechanism. With that said, it has paid to pay attention when it approaches these levels.
- I know I'm old when I choose frozen yogurt and foot rubs over partying with rock stars. Or, maybe I've just learned the difference between having fun and being happy.
- "Gratitude reciprocates."
- High-beta stocks continue to be a great proxy for risk appetites, whether or not you agree with the price action.
- Time-stamp the emails I'm getting from folks arguing that penny stocks are working because they're up 1,200% in a few months. I love the space long-term, but please remember I've been on that train since 2012. Not tootin'; I just don't want to see folks get burned (so to speak).
- Good luck today, and thank you!
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Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
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