TUESDAY 3/4/14; Putin Stands Down; Global Markets Rally

RBA leaves rates unchanged as expected so banks enjoy moderate upside. Japan companies are raising salaries for the first time in a couple years. The yen weakens sending the dollar/yen up to 101.70 and NIKK +0.5%. Asian markets are all marginally higher except for China and South Korea. Metals and gold stocks pull back as Russia begins to blink and pulls back troops from Ukraine borders restoring calm. The de-escalation by Putin sends global markets strongly higher with indexes and stocks recovering one-half and more of yesterday’s losses.

Putin speaks from his residence concerning the Crimea and Ukraine situation justifying his actions to date. He orders troops to return to bases concluding the war games that had mobilized 150K soldiers. Putin says “there is no need to use military force in Crimea, yet.” He says it remains a choice of last resort. His words immediately calm global markets. Putin pulls the troops back from the borders but the 16K soldiers remain in Crimea. He says Yanukovych remains the president and the takeover in Ukraine is an “unconstitutional military coup and seizure of power.”

Putin insists that Russia was asked to intervene in Crimea by Yanukovych. Russia will only send troops into Ukraine in an extreme case but the toehold on Crimea remains. The troops are returning to bases but they remain readily available. Putin says “markets reacted nervously to events due to the US policy.” He must be very concerned about his stock market tumbling lower and that likely created his move to de-escalate the situation. Russian oligarchs are likely pressuring Putin. Putin says “sanctions will hurt Russia and Europe equally.” He is probably concerned about the lasting negative effects of economic sanctions on his economy that is already weak. If the West blacklists Russia, the economy and market cannot bear the strain. Putin says he is not considering adding Crimea or Ukraine to Russia. The Micex Index pops +5%. The Russian Ruble strengthens to 36.276 after a weaker 36.49 and higher print yesterday. Gazprom recovers bouncing +6.2%.....

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

The RUT is up 32 points, +2.8%, printing a new all-time intraday high at 1212.82 and new all-time closing high at 1208.65. Small caps are on fire. The RUT runs higher fueled by speculative biotech and biopharma stocks. The biotech bubble is very ripe for popping soon. The bullish euphoria is rampant. Long traders high-five each other at the end of the day and will be enjoying an extended happy hour. Market participants are giddy. The dollar/yen is up to 102.25. The BOJ creates a weaker yen today to add market upside juice. The XLF jumps +2%. Trannies gain +2.2%. VIP, the TJ Max of China, catapults +32%. Tobacco stocks LO, MO and RAI are up from +2% to +6%.

VIX remains above 14 closing at 14.10. The CPCE drops to an uber low 0.48 verifying the rampant complacency and consistent for a market in a topping phase. The CBOE SKEW Index is at 130 printing another uber high at 140 only a few days ago. The high skew readings forecast a market top at hand just as it did ahead of the January sell off. After the bell, SWHC shoots +7.3% higher on great earnings. Flexcoins is the second bicoin exchange that shuts down. The Poloniex exchange says it is missing over 12% of its assets. The Mt Gox incident was not isolated so these developments are a black eye for bicoin.

40% of the cyber attacks against the US occur from Russia so the Ukraine turmoil may exacerbate cyber warfare. The space program also relies on Russia-US relations. The East and West jockey for positions in the Ukraine political dance that will likely be a very long tango. Merkel and Putin are dancing the tango this evening working towards a solution to de-escalate the Ukraine and Crimea situation but is Putin sincere, or, a cagey ex KGB man? 16K Russian troops remain in Crimea. Asian stocks are setting up to move higher.