Stocks moved down convincingly Thursday and Friday as market participants opted for caution amid ominous developments in the Ukraine situation. When geopolitical events are building, it is common for the market to favor a risk-off posture ahead of a weekend.
The Nasdaq took out Monday's swing low (purple line below) which was mentioned as being the key short-term level.
A rally may be expected once the market is able to discount much of the uncertainty surrounding Ukraine. The character of that rally -- such as breadth, volume, and leadership -- will once again be examined to gauge its legitimacy. As noted in Wednesday's report and on Twitter, this type of rally occurred in '91 and '03 just prior to the onset of war.
With the government sharing with the public some of its Ukraine intelligence gained from radio intercepts and satellite imagery, it would seem there is not a lot of which the market is unaware. Exception: the use of chemical weapons.
Two of the three System R long trades that triggered Wednesday were stopouts. This illustrates how even a system with a 65%-69% win rate like R will be subservient to the trend of the averages, which turned lower the following day, Thursday.
On the long side, the better actors include oil & gas explorers, metal ores, shippers, and fertilizers. None of these offer anything attractive.
The short side is extended and unattractive.
In summation, historical precedent says a rally soon into any conflict is a distinct possibility. If this occurs, our best opportunity may be on the short side if any rally is short-lived. This would mean longing an inverse ETF like SQQQ, if not shorting individual software issues.
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