Wait And See

As the Crimea vote approaches, the market brace itself by pulling back to avoid the possible onslaught of reactive selling. There shouldn’t be a big surprise the outcome of the vote is to join Russia. The uncertainty is not on what will be the voting result, but it is on what will happen after the vote. Will there be uprising internally between the Ukrainians and the pro-Russia backers in Ukraine? Will this uprising be an excuse for Russia to invade Ukraine and permanently station its troops inside of Crimea? These are the uncertainties that the market is pondering. What will be the consequence on the global market when the US and EU impose sanction on Russia (if they do carry out their bluff.) But in regardless what is going to take place, the market doesn’t appear to be in the 10-15% corrective mode that many of those market top callers been waiting for. Certainly the mood can change from the ‘wait and see’ to ‘sell everything then question later’ if some unexpected event occurs. But until there are signs that the market is in a full retreat, the market will continue to move higher from these minor dips until all those non-believers capitulate and buy this market at all cost.

The market closed down on Friday with the SP500 down 5.21 at 1841.13, DJIA down 43.22, Nasdaq 100 (tech heavy) down 23.63, and the Russell 2000 gained 4.67 points. The more interesting stat is the advance and decline issues, the new high and new low. Although the DJIA and SP500 were down, the advanced issues outnumber the declined issues in the NYSE and in the Nasdaq. Furthermore, the number of issues made new 52 weeks high outnumbered the issue made new 52 weeks low. Even the up/down volume is relatively flat. Based on these market breadth indicators, it does not appear the market is in a corrective mode (sell off). It seems like the market simply locking in profits from some of those recent high flyers and avoiding emotional selling from those with weak hands and prepares to take advantage of the potential bargains.

The market is showing sign of internal weakness as it is hovering near its all time high territory. This could be an early indication of a market top is near. But until the market has formed a top, one should continue to be defensive at this juncture of the market cycle. For this reason, one should be aware of the potential support levels for the market to hold rather than how high the market can go.

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In this video, a look at the market indices and the potential support levels to monitor, and a review on the following stocks: FB, TSLA, TWTR.

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