Wednesday's Market Minute: It's Not Russia

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The beauty about lines on charts is that there’s only four ways you can describe them: horizontal, vertical, and sloped up or down. Drawing lines on charts enables us to describe, with as purely objective terms as are available, what the price of an asset is doing. As long as we all have the same definitions of these lines, we can (hopefully) agree when the direction of a line changes.

Not a single one of the most important lines in the market has changed direction since the Russian threat to Ukraine became daily news, which I’ll argue was about the third week of January. The few stock charts that were going up still are, and the ones that were going down continue to do so. Certain aspects of this geopolitical narrative may be accelerating certain trends – like crude going higher, or the Russian Stock ETF extending to new lows after peaking in November. 

Guess what else peaked in November? Cloud stocks. Chipmakers. The Nasdaq! Did Russia do that? I remember most people talking about Omicron back then. If an invasion of Ukraine leads to a global conflict, there certainly will be economic impact. But right now, the only major chart doing anything new is arguably gold. The precious metal had been firming up for months prior to the Russia headlines, but got an even more notable bounce than crude oil, in that gold is meaningfully breaking away from a downtrend for the first time in 18 months. Other than that, things are business according to the New Usual. 

There are three types of tech stocks investors can choose from: those that peaked a year ago, those that peaked in November, and those that maybe have not yet peaked. In that third and smallest cohort are stocks like Apple, Cisco, and Google that are holding longer-term uptrends and have not yet crossed the bear market threshold of 20% down. The list is short. 

It's impossible to see any clear impact from the Russia-Ukraine story on charts that have been forming trends for months or years. That means traders should be cautious in storming in to buy the dip if the Ukraine risk cools. It could be good for a fade in gold or a short-term relief bounce in risk assets, but there's little reason to think it would mean anything more than that in the grand scheme of inflation-driven Fed tightening.

Image sourced from Unsplash

This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.