Russia Invades Ukraine and Markets Recover?!

Local Optima -

Not always things makes sense in the Markets. Today there was a sharp sell-off  at the beginning of the trading session after Russia started a full scale invasion of Ukraine. After all the Market is a discounting mechanism, for some reason that maybe is hard to understand at the moment, the expectation is that somehow things will improve in the future, or at least the Market is perceiving it in that way.

Reviewing the 39-min chart of the S&P 500, it's clear the initial gap down and then the Market started recovering closing above the 4,250 level. Does this mean that a multi-day rally could start? Tomorrow we will have at least a partial answer. For me, it's concerning that the S&P went that low (orange arrows), on the positive side there was a powerful recovery.

S&P 500, 39-min chart, you can click the image in order to zoom in

What is troubling me more is the daily chart, if the S&P is unable to get past 4,600 we will be seeing a downtrend forming. Lower lows and lower highs (check the black arrows and lines in the screenshot below). Everything is possible in the Markets, I wasn't expecting a recovery after the invasion of Ukraine, however investors recovered the risk appetite and that got reflected in the indexes.

S&P 500, daily chart, you can click the image in order to zoom in

The New Highs and New Lows (NH-NL) show also an interesting development. Clearly the numbers are bearish in all the timeframes, however, if we compare the numbers we got today against the numbers we got on Jan/24 (the previous low of the year) we see that at least so far Bears lost some power. On Jan/24 the S&P went down to 4,222 and the New Lows on the Monthly timeframe were 4,038 (green arrow), today the S&P got even lower to 4,114 and the New Monthly Lows got to 2,602 only.

I'm still staying on the sidelines, it's too soon for me to start opening new long positions. Maybe only in the Oil Industry I would consider something incredibly attractive. Until those NH-NL numbers don't show an improvement in the Monthly timeframe (the fastest of all the ones I track) then it's too risky to try to pick the bottom of the Correction.