Earlier on Friday, Ukrainian
officials demanded that Russia explain the presence of troops massed at the
border of the two countries. President Obama also spoke with allies in France,
Germany, Italy and the UK, agreeing to introduce another round of sanctions
against Russia for its failure to observe the Geneva accord, which was signed
last Thursday. The re-emergence of
tensions between Russia and Ukraine will contribute to increased broad market
volatility if the situation isn’t soon resolved.
As I pointed out in the April 14 report, the
Russia ETF (RSX) still looks weak in the immediate-term and isn’t far above its
March low. Keep in mind that the last
time RSX dropped in March it helped trigger the U.S. stock market decline. As I wrote in the April 14 report, “Investors
can ignore Russia for now, but if Russia’s stock market makes a new yearly low
in the coming days it’s doubtful Wall Street will simply shrug it off.” This assessment is particularly important
entering next week, when RSX will most likely test the key 21.00 level and may
even penetrate below it.
The latest geopolitical
concerns led to some safe-haven flows into Treasuries and gold, both of which
posted gains on Friday. The 20-Year
Treasury Bond ETF (TLT), which confirmed a Coppock Curve buy signal
in February, was up 0.14% on Friday to make a
new high for the year, while the gold ETF (GLD) gained 0.70%. The recent firming of the gold price is
another subtle indication that serious investors are starting to worry about
the broad market outlook in view of increased geopolitical tensions, not to
mention the continued slowdown of both China’s and Japan’s economies.
Excerpted from the Apr. 25 issue of Momentum Strategies Report]
