Russian President Putin recognizes two breakaway regions of Ukraine, Luhansk and Donetsk, states Bill Baruch, President of BlueLineFutures.com.

These regions have been controlled by pro-Russian separatists since 2014. The West sees the move as a dramatic escalation towards conflict. On Tuesday, Russian “peacekeeping” forces move into the regions. Putin’s speech took place after the equity close of Monday’s holiday shortened session. The EU has proposed sanctions and Germany halts Nord Stream Two pipeline.

The world now waits on the West to respond.

In terms of the markets, The S&P 500 (SPX) gapped lower on the reopen, down 2% to 4,250, lowest since January 24. Peak negativity? Goldman Sachs said, “outright Russia-Ukraine conflict and punitive sanctions could push stocks another 6% from Friday’s close.”

Things are never as bad as they seem, within that moment. Low came within first 30 minutes of trade and S&P unchanged at onset of US hours. Gold spiked to a high of 1,918.3, testing rare major four-star resistance. Has backed off. US 10-year yield slipped to low of 1.85% and has rebounded.

Expiring and untradable March Crude spiked to 96.00. Front month April reached 94.95 and has fallen 2%, while still up 3% on the session.

Flash PMIs for February from Europe yesterday were strong, but manufacturing was dragged by Germany. Very robust out of the UK Case Shiller Home Price Index is due at 8:00 am CT. US Flash PMIs for February due at 8:45 am CT. CB Consumer Confidence due at 9:00 am CT along with Richmond Fed Manufacturing. US Treasury auctions $52 billion two-years today, $53 billion five-years tomorrow, and $50 billion seven-years on Thursday.

E-mini S&P (March) / NQ (March)

S&P, yesterday’s close: Settled at 4,343.50, down 31.00 on Friday and 66.00 on the week.

NQ, yesterday’s close: Settled at 13,966, down 168.75 on Friday and 244.50 on the week.

Risk-off into Friday’s close. From Thursday’s settlement, today’s low in the S&P is 4.9%. Makes you realize how efficient markets are. Especially when that 4,250 is closely aligned with broad support. We took a cautiously Bearish Bias in the back half of last week. We are Neutralizing that now. NQ settled Friday right at low settlement of January. Pac-man licking his chops into the holiday hours and cleaned up. Some peak negativity in near-term paved way for bounce.

Would not be surprised to see S&P chop a bit between 4,100 and 4,500, new low still possible before Fed’s March meeting. Tape buoyed by our momentum indicators ahead of the open, denoted as first key supports below. The overnight rebound ran into strong major three-star resistance aligning at 4,355 in the S&P and 14,164 in the NQ.

Crude Oil (April)

Yesterday’s close: Settled at 90.21, up 0.17 on Friday and down 1.21 on the week.

Nice bull-flag pattern with slightly lower highs and slightly lower lows was quietly built through last week. Spike, geopolitical of not, has tremendous technical tailwind. Confirmation for next leg needed with a close above major three-star resistance at 93.50-93.83, April contract high. Some capitulatory-ness within today’s spike, ups the ante on toady’s close. Bank of America joins Citi in the call for lower Crude. BoA says $80 as “demand retraces”. Nigeria said no need to expand oil production increases. Iran Nuclear Deal, how close?

Impact from Russia? How much already discounted.

Gold (April) / Silver (March)

Gold (GLD), yesterday’s close: Settled 1,899.8, down 2.2 on Friday and up 57.7 on the week.

Silver (SLV), yesterday’s close: Settled at 23.992, up 0.117 on Friday and 0.623 on the week.

Back out of the forest to see the trees, do not get caught in Gold’s geopolitical euphoria.

We like Gold a lot this year and believe a new record high can be achieved. However, price action is running into rare major four-star resistance at 1919.2-1930.3 We do not see this level being taken out without a near-term pullback unless full blown war breaks out. Silver has lagged and has tremendous technical headwind. US Dollar is still subdued from recent highs, and this is underpinning rally along with geopolitics

We cannot ignore retreat in ten-year futures, higher yields from the overnight. A near-term headwind. Probability of 50 basis point hike in March now is only 30.8%. We expect these probabilities out to December to erode in the coming months and become a bullish tailwind to Gold.

Our momentum indicators, denoted as our Pivots below, have caught the tape and could exude some near-term exhaustion upon slipping below. Our patience points to a tremendous buy opportunity in Gold.

Learn more about Bill Baruch at Blue Line Futures.