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Weekly market recap: Tensions in the Ukraine

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For the week ending March 8, 2014

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Overview

This past week the markets again posted new all-time highs (except the Dow), but tensions in the Ukraine are escalating causing concern that it will trigger a market correction (or large drop) in the near future.

Markets gapped down at the open on Monday as Russia sent troops into Crimea earlier late Friday. But that gap was filled quickly as investors felt a diplomatic solution would avoid a conflict. By Tuesday, Russia pulled back its troops to its bases and the markets gapped up at the open ending the day up over 1 percent.

During the rest of the week, the markets consolidated while waiting for the Employment Situation data (Jobs Report and Unemployment Rate) on Friday. The ADP Employment Report on Wednesday, a precursor to the Jobs Report, came in lower than expected (139,000 actual vs. 150,000 expected) and this led the markets to expect a lower jobs number on Friday. The jobs number came in higher than expected (175,000 actual vs. 150,000 expected) and the markets opened up (reaching new highs), but ended mixed by the close on Friday.

Late yesterday (Friday), the crisis in the Ukraine increased as the dispute between Moscow and Kiev over control of Crimea escalates, and a diplomatic solution appears not to be working. Pro-Russian troops reportedly invaded a Ukrainian airbase, Russian ships have surrounded Ukrainian ships, and armed men are refusing entry of military observers at the border. In addition, Crimea's parliament has accelerated plans to secede from the Ukraine and join Russia. In response, President Obama has ordered sanctions. See Political, military standoff escalates in Ukraine's Crimea region.

Globally, the markets in Europe remain concerned especially after the Crimean parliament escalated efforts to secede. Most equity indices advanced, with increases ranging from 0.1 percent for the Shanghai Composite to 3.8 percent for the Sensex; declining indices ranged from -0.2 percent for the KLCI to -3.5 percent for the DAX. There were four major central bank meetings during the week; their policies remained unchanged.

China's Premier Li Keqiang has left the GDP target at 7.5 percent for this year with an average inflation rate of 3.5 percent.

The abundant economic data on manufacturing (PMIs) and services indicates that the global economy continues to expand. Employment data in the U.S. shows promise while employment data in Canada is disappointing.

Overall, equities in the U.S. advanced over the last five weeks as earnings grew 7.5 percent and corporations are using surplus cash to buy back stocks and for mergers & acquisitions. With the unemployment rate at 6.7 percent, we can expect discussions within the Fed to consider raising interest rates shortly. As the events unfold in the Ukraine, volatility will increase and there is a potential sharp drop if a diplomatic solution fails and military action by Russia escalates.

The focus next week will be on Retail Sales and the Producer Price Index. There is little economic news, so the primary focus will be on the Ukraine and the response by the U.S. and the Euro zone nations.

Market Gauge

Year-to-date the markets are mixed: Dow -0.7%; S&P500 1.6%; Nasdaq 3.8%.

The Markets for the past week were: DJIA up 0.8%; S&P500 up 1.0%; Nasdaq COMP up 0.7%.

Commodities (ETFs) for the past week were: Gold (GLD) up 1.15%; Silver (SLV) down -1.33%; Oil (OIH) up 0.51%; Dollar (UUP) down -0.05%; 30-yr Bonds (TYX) rose 14 basis points to 3.72%.

The VIX this past week (a measure of market sentiment and volatility) rose to 14.11 due to events in the Ukraine.

Top Headlines

To view details of headlines, go online to CNBC.

In the U.S.: Fed's Dudley: Jobs market still hobbled; Stronger jobs could signal higher rates; Heating up: Job creation accelerates; What’s the real unemployment rate?; US trade deficit steady, exports bounce back; Here are 5 clues to the health of the US job market; US factory orders drop adds to slowdown concern; Fed's Plosser 'very worried' about QE consequences; Fed's Williams sees rate hike by mid-2015; US claims fall, but workers grow less productive; Pace of job cuts eases in February: Challenger; Services sector index falls, misses estimates; Cold weather bites job growth in February: ADP; Slide in rates boosts weekly mortgage applications; Why Puerto Rico and its mess stand alone; National parks add billions to US economy: Report; Obama budget sets up election-year debate with GOP; Bernanke: Fed could have done more during crisis; Manufacturing growth accelerates in February: ISM; US consumers earned—and spent—more in January; Factory activity growth highest since 2010: Markit; Kocherlakota: Instability not a pressing issue; and Big or small, spending-cut efforts hit roadblocks.

In Europe: Russia: Any US sanctions will 'boomerang'; Ukraine’s PM: No concessions on Crimea; Scots could lose out on pensions; Putin rebuffs Obama as Ukraine crisis escalates; Greek bank selling bonds: Would you buy?; More UK austerity looms: Huge black hole revealed; Euro flies higher - and could continue to rise; Birmingham football club boss jailed for 6 years; Contained or contagion: How to play Ukraine; Crimea votes to join Russia; Obama orders sanctions; Will the crisis in Ukraine impact investors?; Every oligarch for himself: Crazy days in Ukraine; Why the world should keep an eye on Ukraine; Ukraine Fin Min: We're broke but we won't default; ECB ups 2014 growth forecast, inflation to pick up slowly; French unemployment dips – along with confidence; Is Italian soccer giant AC Milan up for sale?; Crimea votes to join Russia, accelerating Ukraine crisis; Chief executives: Scottish independence is bad for business; France's Sarkozy to sue over secret audio recordings; Are Russian stocks a screaming buy?; Vitali Klitschko: Putin worried over Ukraine; Russia rebuffs West on Crimea amid Paris talks; and Ukraine crisis could mean higher meat prices in US.

In Asia: Malaysia Airlines says plane still missing; China draws a 'red line' on North Korea; China February exports tumble; Indian shares rally to record high; Why China needs a national property tax; Japan pension fund may join Nikkei party at last; China allows first corporate bond default; Jaguar taps Beckham as China brand ambassador; Who's your daddy, bitcoin? 'Not me,' Nakamoto says; s Singapore the next Silicon Valley?; Bitcoin CEO suffered other issues before death; India’s dodo dynasties fear extinction at the polls; Police probe suicide of virtual currency exchange CEO; World's most expensive city to rent property; IBM workers strike in China over Lenovo takeover; Premium liquor sales in China hit sobering wall; StanChart Asia CEO: ‘Still a good year,’ despite profit drop; Three years on, tsunami survivors far from healing; Just how expensive is Singapore?; Street fighting erupts as India heads for election; s Fast Retailing getting too ambitious?; India to kick off world's biggest election on April 7; Indian elections: What to expect; and Rare bond default warning in China a good thing?.

Weekly Review

To see the week in review, go to the Econoday calendar.

On Monday, with the Russian occupation of Crimea, the Dow dropped -0.9% to 16,168.

On Tuesday, with comments by Vladimir Putin easing tensions along with a pullback of troops, the Dow rose 1.4% to 16,395. Gold dropped $10 to $1,340; Oil dropped $1 to $103.50.

On Wednesday, with the situation in the Ukraine stabilizing and poor economic reports, the Dow dropped -0.2% to 16.360.

On Thursday, with good jobless claims and chain-store sales data, the Dow rose 0.5% to 16,272. Gold rose $10 to $1,350.

On Friday, with a better than expected jobs report being overshadowed by the situation in the Ukraine, the Dow rose 0.2% to 16,452. Gold dropped $10 to $1,340.

Next Week's Calendar

To see what's on the calendar for next week, go to the Econoday calendar.

The economic calendar for next week is light: on Monday – FedSpeak; on Tuesday – nothing; on Wednesday –Weekly EIA Petroleum Status Report, Treasury Budget; on Thursday – Weekly Jobless Claims, Retail Sales, Import and Export Prices, Business Inventories; and Friday – PPI-FD, Consumer Sentiment.

If the Markets move down, stay on the side lines or consider Contra ETFs. For Option players, selling premium is advised. To learn more about options and earning consistent weekly income, go to optionsannex.com.

To the Charts

The following ETFs (DIA, SPY, QQQ) provide a technical review of the Market (and are also excellent Option trading vehicles). Represented are the Dow Industrials (DIA), S&P500 (SPY), and Nasdaq 100 (QQQ).

The Charts for each include views for Monthly, Weekly (including Price Channels), and Daily (including monthly Pivot Points) with MACD and Stochastic indicators. The Pivots are: white for central pivot point; yellow for R1 and S1; magenta for R2 and S2; red for R3 and S3.

DIA

The Dow Industrials (DIA) closed up at 164.34. If the DIA drops, then the next level of support will be at 153.12 (weekly chart); the next level of major resistance is 165.51 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving down above the overbought area.

The weekly chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving up toward the overbought area.

The daily chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving up above the overbought area.

SPY

The S&P500 (SPY) closed up at 188.26. If the SPY drops, then the next level of support will be at 173.71 (weekly chart); the next level of major resistance is 188.96 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving down above the overbought area.

The weekly chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving up above the overbought area.

The daily chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving up above the overbought area.

QQQ

The Nasdaq 100 (QQQ) closed up at 90.53. If the QQQ drops, then the next level of support will be at 83.74 (weekly chart); the next level of major resistance is 91.36 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving down above the overbought area.

The weekly chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving up above the overbought area.

The daily chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving up above the overbought area.

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