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Russia-Ukraine Invasion Low Holding

It has been a little more than a week since Russia invaded
Ukraine. The good news is the initial low from the start of the invasion is holding
so far. As you can see in the charts here if these lows around the close on
February 23 and the intraday low on February 24 don’t hold the next level of support
is around the March 2021 lows of NDX 12250 and S&P 3750.

The invasion removed one uncertainty (Why is Russia amassing
forces along the border?) and introduced countless more for the market to sort
through. Market volatility has remained elevated, but thus far it has not
spiked to the levels last seen at the beginning of the pandemic.

Ukraine has successfully resisted Russia forces thus far and
the international community has come together in a limited capacity to hit
Russia and its supporters with sanctions. What ultimately unfolds in Ukraine is
still an unknown, but it is increasingly clear that Russia’s current leadership
is going to forever be shunned by the majority of nations regardless of the
war’s outcome. The human toll and economic impacts are likely to be
long-lasting as well.

Last week we presented a table of past Geopolitical
& Energy Crises
in an effort to provide some context for current
events. Some observations that can be made from that table is the market always
finds a way to work itself higher, but the exact time largely depends on the
duration of the crisis and any long-lasting effects.

Timing of the crisis also appears to play a role in the
market’s response as crisis during a relatively healthy domestic economy such
as the Cuban Missile Crisis had only a minimal impact on the intermediate- and
longer-term trajectory of the market while the Arab Oil Embargo only worsened
an already tough economic situation.

The current Ukraine crisis arrived when the U.S. economy and
market were relatively healthy so it is reasonable to expect, provided the
situation doesn’t considerably escalate, that current volatility will
eventually recede and the market will get back to doing what it has
historically done, climb higher.

Since this year is a midterm year, it would not be completely
without historical precedent for the market to remain volatile throughout the
balance of the first quarter into Q2-Q3 before finally finding firmer footing.
The midterm bottom could also arrive early this year. Continue to heed stops,
remain focused on your strategy, and be prepared to put any cash back to work.

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