Posted 9:50 AM ET – Yesterday the market gapped down on news of the Russian invasion. The S&P 500 opened on its low of the day and it closed on its high of the day leaving a gigantic bullish hammer on the daily chart. Support has been confirmed at SPY $420 and we are going to see follow through buying today.
What’s happened in the Ukraine is horrific. I am Latvian and my prayers are with you.
From a market standpoint Putin is going to get away with it. The EU is too fragmented and they rely on Russia for food and gas. Any economic sanctions will be “toothless”. They can’t remove Russia from the SWIFT banking system for fear that European banks will fail. In general, European banks are extremely weak and the ECB has allowed them to pledge “junk” as collateral for years. That is a topic for another time.
The economic sanctions will have an inflationary impact on food and energy. This will create a stiff market headwind as we prepare for the FOMC meeting in March. We already know that Fed officials are hawkish and the tone is souring quickly.
Swing traders can buy SPY on the open. I believe this will be a good longer term (4-6 months) entry point. Expect some after-shocks and a retest of SPY $420 in the next month.
Day traders should look for opportunities to buy. I noticed early strength in the QQQ. AAPL, AMZN, MSFT and GOOGL yesterday. The longer you can hold off buying this morning, the better. Know that you might have to jump into action early if you see consecutive stacked green candles with little to no overlap. If this makes you uncomfortable, buy a little and add on strength. The one thing that I was hoping for was a round of very heavy selling yesterday right out of the gate and an instant rebound off of that low. We did not get that capitulation. The D1 chart does look very constructive and I am going to go with the fact that we opened on the low and closed on the high.
Support is at $420. Resistance is at $434 and $432.50.