Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

What The Russian Invasion Of Ukraine Means For The Market

By MarketBeat.com (Thomas Hughes )Market OverviewFeb 26, 2022 11:45PM ET
www.investing.com/analysis/what-the-russian-invasion-of-ukraine-means-for-the-market-200618839
What The Russian Invasion Of Ukraine Means For The Market
By MarketBeat.com (Thomas Hughes )   |  Feb 26, 2022 11:45PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

The Market Bottoms In Wake Of Ukraine Invasion

As dire as the news from Ukraine and Russia is, the selloff in equities sparked by the crisis appears to have already hit bottom. The S&P 500 fell more than 2.0% on the news to extend its selloff to over 13.5%, but hit a bottom and reclaimed all of the loss and more by the end of the session.

The key takeaway is that this bottom is unrelated to the underlying factors driving the market which include outrageously high inflation and its impact on earnings. As for Ukraine and Russia, the near-term impact will be to drive inflation via supply chain disruption and higher gas prices. That will increase the pressure on S&P 500 margins which means the market correction is probably not over.

Oil Breaks To New High On Russia Aggression In Ukraine

Oil prices (NYSE:USO) broke out to a new high following the Russian invasion of Ukraine. The spike was driven by fear of tightening supply and the possibility Putin could weaponize its fuel deliveries to western Europe. The price of WTI spiked more than 7% on the news and could move higher although the technical picture is still murky.

The spike in price was met by sellers and profit-takers who were able to drive it back down to the previous day's close. The candle formed is a large doji candle at the top of an uptrend and may qualify as a Tombstone or Shooting Star.

WTIC/USD Chart
WTIC/USD Chart

If the oil market cannot maintain these levels and begins to fall, the oil price may enter a correction, but that is not supported by the fundamental outlook. The supply and demand outlook for this year is tight and was supporting the rise in oil even before the Ukrainian crisis began to emerge.

The more likely scenario is that oil will pull back slightly and/or consolidate at the current level until other news arises. That may be an increase/decrease of tensions in Europe, oil supply data, or other economic data. Regardless, oil is trading at a 7-year high which means added pressure to inflation and windfall profits for the oil producers.

The Real Risk For The S&P 500 Is Earnings

The real risk for the S&P 500 is the earnings outlook. The retail sector began reporting this past week and the news was without excitement. The key takeaway was that the earnings outlook was tepid in relation to the prior year and estimates were falling.

This was leading to a downward trend in the consensus for earnings estimates and that was what was ultimately reading the market lower. If this trend continues, no amount of good news from Ukraine will support the index. With oil prices on the rise and supply chains still in turmoil, we do not expect this trend to end.

Turning to the charts, the price action in the S&P 500 was indicative of a bottom but the question was if the index will reverse course and begin marching higher, or if this was just the prelude to another decline. The primary indication of bottoming lay in the doji candle which formed with the day's action and the indicators which were both showing significant divergence from the new lows. This combination had a high likelihood of resulting in a rebound but that does not mean reversal.

The key level for the market to watch would be the 4,300 support line that was just broken because it may turn into resistance. If the index can not regain the upper side of 4,300 within the next few days, there was a near 100% chance the S&P 500 will retest the new lows and may even set a new lower low.

S&P 500 Chart
S&P 500 Chart

Original Post

What The Russian Invasion Of Ukraine Means For The Market
 

Related Articles

Jeffrey Halley
Knot-Tying Masterclass Continues By Jeffrey Halley - Jul 05, 2022 1

I certainly haven’t missed much in my short absence. Yes, volatility remains elevated across every asset class to be sure, although a US holiday yesterday meant a 12-hour...

TD Ameritrade
Investors Already Looking Toward Friday’s Job Report By TD Ameritrade - Jul 05, 2022

Several employment indicators leading up to Friday’s June job report will likely serve as tea leaves for analysts trying to guess those key numbers at the end of the week. With an...

What The Russian Invasion Of Ukraine Means For The Market

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email