WASHINGTON, February 27, 2014 – Markets have been confused this week. It appears that cautious retail traders are re-entering markets in the a.m. hours while cynical pros are dumping stocks later in the day. But things may take a decisive turn for the worse this morning as the situation in the Ukraine deteriorates.
Reports continue to emerge that the Russian army and so-called “Russian gunmen” are taking control of government buildings in Crimea, the crucial Ukrainian Black Sea peninsula that Russia views as crucial to its own security. This is the sort of thing that can turn dangerous in a flash and may already be headed in that direction. It’s clear from what happened in the former Soviet state of Georgia not so long ago—essentially a partial Russian territory grab—may be in the offing here.
Former lifelong KGB operative and now Russian president Vladimir Putin seems ever more determined to resurrect the old U.S.S.R. in some way, shape, or form. And with the Eurozone’s economy crippled and with the U.S. headed by the most feckless and likely socialist president in this country’s history, it’s likely that the West will employ only rhetoric to stop him.
Investors have been surprisingly casual about the deteriorating Ukrainian situation, just as they have been with the increasing violence in Venezuela and, in large part, with the ongoing equal opportunity slaughter occurring daily in Syria. But stock futures are down sharply this morning while gold is catching the bid it was missing yesterday, both clear indications that market-moving international problems may be about to impose themselves on the averages.
Europe is trading lower this morning and that action is likely to spread to the U.S. market open at 9:30 a.m. EST.
In other news, lest it be forgotten, new Fed chair Janet Yellen will appear this morning on Capitol Hill, presenting testimony before the Senate Banking Committee. As always, nervous investors will be looking for clues and reassurance from the Fed angle. Any perceived misstep in today’s testimony could make an already nervous market head for the hills.
Today’s trading tips
If you hold gold or gold ETFs, it might be a good idea to hold on to what you have, using any near term weakness to pick up a bit more. Do be aware, however, that, should the Ukraine in particular turn out even partially well, gold could be sold down hard for at least a day or two, as the metal has been quite volatile over the past year or so.
Otherwise, if things are looking dire, portfolios can be hedged with the usual suspects, the slow moving short S&P 500 ETF, symbol SH; the double short version, happily dubbed SDS, perhaps in commemoration of those ‘60s and ‘70s lefty subversives; and possibly the hedge we just took off, the managed short ETF whose symbol is HDGE.
Buys today are probably not advisable unless you like to live dangerously.
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate. He currently does not own but may trade today in the hedge positions noted above.
Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk. Caution should be exercised at all times.
Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.
References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.