MONDAY 3/3/14; PMI's; ISM Mfg Index; Ukraine Contagion

Ukraine contagion cascades around the world overnight. Ukraine vows to not give up Crimea, however, the Ukraine military budget is about $4 billion per year versus Russia’s military budget of nearly $80 billion per year. Ukraine is unable to resist Russia; Putin is in the driver’s seat. NIKK falls -1.2% down for the fourth straight day. The dollar/yen collapses to 101.32, dropping under 102, so the stronger yen sends Japan stocks and US futures lower. Fast Retailing is a lone highlight reporting robust winter clothing sales. Copper drops on the weaker China manufacturing data. The Shanghai Index finishes +1% higher avoiding the negativity that blankets Asia since traders believe better news will occur once the China National People’s Congress convenes on Wednesday. Aussie miners are sold off from -1% to -3%. The Indian Rupee drops the most in two weeks as the economy weakens.

At 3:20 AM, the Russian Ruble is 36.45 (36 spot 45). The Russian central bank delivers a shocking rate hike to 7% to prevent inflation and stop the slide in the ruble. Russian equities tumble -10%. The Russian Micex Index collapses -9%. There is capital flight out of Russia. Natty gas price sky rockets higher to 4.71 up over +2%. Europe relies on the natural gas and oil pipelines from Ukraine. Gazprom, the Russian natural gas and energy giant, collapses -11% after announcing the possibility of gas rate hikes to increase pressure on Ukraine. Putin is moving quickly placing the West back on its heels. WTIC crude oil jumps nearly +2% higher to 104.25. Ditto Brent crude oil at 111.13. Gold spikes +1.5% to 1347 receiving a safe haven bid. The dollar is 79.85. Dollar/yen 101.36.

FTSE loses -1.3%. European markets are red across the board due to the Ukraine contagion. CAC -1.9%. DAX -2.5%. Spain’s IBEX -2.1%. Italy’s FTSE MIB -1.6%. Euro 1.3786. Pound 1.6739. S&P futures -17. Dow -122. Banks such as SocGen and Unicredit sell off.........




[Text is Redacted: Purchase March 2014-03 to Read the Complete Chronology]

Equities place an intraday bottom at noon time and recover in the afternoon with the Dow down about 150 points. President Obama says he wants Ukrainians to “determine their own destiny.” In other words, they are on their own. This will serve as a further green light for Putin. Russian television is feeding propaganda to the masses calling the anti-government protestors in the Ukraine hypocrites, terrorists, radicals and neo-Nazi’s. Obviously, Russian television and radio only provide one view point; the Putin view point. Wheat prices jump over +5%. Potash is also affected by the Ukraine turmoil. POT +0.6%. IPI +0.4%. AGU +1%.

The trading session ends with the SPX down 14 points, -0.7%, to 1846. The Dow loses 154 points, -0.9%, to 16168. The Nasdaq dumps 31 points, -0.7%, to 4277. The RUT drops 7 points, -0.6%, to 1176. The computer programs are in control moving the broad indexes uniformly down. Gold miners run higher. Commodities run strongly higher up 16 of the last 20 days. Integrated oils drop lower. XOM -0.8%. CVX -0.4%. AZN lose -1.3% on a downgrade. MGA jumps +5.1% after announcing positive results and raising the dividend. Patent company VHC swings wildly with price covering about 50% of its range and settling 7% higher. VirnetX receives favorable press over a patent and royalty dispute with AAPL. Tobacco mergers are heating up with RAI exploring a bid for LO.

Despite the negative down day, traders are buying the dip. Complacency remains entrenched in the stock market and the bullish momentum and euphoria continues. The VIX is up to 16 today bur remains far away from the 20’s and higher that would indicate fear developing. The CPC and CPCE put/call ratios remain muted verifying the complacency and lack of fear in markets. The CPCE actually drops today as traders rush to buy calls and the long side of the market viewing the Ukraine situation as a great buying opportunity. Traders are not worried or concerned and expect equities to continue moving higher.

Harry Dent, notable market technician and demographic expert, says the stock market is setting up for a major crash. He says the Dow should top out over the coming weeks at 17K and then drop to as low as 6K to levels not seen since the late 2008 market crash. Dent says “I think this will be the most dangerous period in people’s lives in investing.”