Wall Street Greek: Stock Market Danger

This report was originally intended to be a premarket report, but was delayed by a third-party publisher of my content. As a result, I’ll be publishing my premarket reports exclusively to the Wall Street Greek Blog and syndication from here to forward, as this information is far too critical to be delayed by hours and not delivered into the right hands on time. This was plainly evident today, as the report failed to reach readers before the important events in Ukraine, which were warned of herein. Please visit the blog daily for your premarket report.

Sector Security	8-15 3:10 PM ET
SPDR S&P 500 (NYSE: SPY)	-0.1%
SPDR Dow Jones (NYSE: DIA)	-0.3%
PowerShares QQQ (Nasdaq: QQQ)	+0.3%
iShares Russell 2000 (NYSE: IWM)	-0.3%
SPDR Gold Trust (NYSE: GLD)	-0.6%
iShares Europe (NYSE: IEV)	-0.2%
iPath S&P GSCI Crude Oil Trust (NYSE: OIL)	+1.0%
PIMCO Total Return ETF (Nasdaq: BOND)	+0.2%
PowerShares DB US Dollar Bullish (NYSE: UUP)	-0.2%
iPath S&P 500 VIX ST Futures (NYSE: VXX)	+1.0%

Friday’s factors driving the stock market are the same ones that have weighed on it over the past several weeks, though with varied specifics. It’s still all about the geopolitical factor and fear of a Russian incursion into Eastern Ukraine and U.S. economic data and Fed rate implications. On Friday, the situation is intensifying, despite mixed sentiment expressed by major media. Because it has not blown up completely, traders are content to buy this AM on somewhat enthusing economic data, but a weekend full of risk will likely soften enthusiasm into the close of trading today. I maintain my position that there is no reason to buy the SPY ETF currently and would sell the security given the current event risk that threatens from Russia. Other ideas are recommended for hedging against this risk at the close of this report, but they should be considered and used carefully. The best thing I can recommend is the non-participation in passive investments like the SPY.

This morning’s Producer Price Index (PPI) report showed prices only advanced modestly and within expectations and norms for a noninflationary period. PPI rose 0.1% in July, in line with expectations, and was significantly less heated than June’s 0.4% increase. Core PPI, excluding volatile food and energy price changes, increased at a digestible pace of 0.2%, again meeting expectations and in line with June. This is not heated inflation, and so investors need not raise alarm about potential faster Fed action to raise interest rates. It’s good news for stocks, in other words.

In other economic news, which is a notch less important to the market this day, the Empire State Manufacturing Survey index fell to a still very expansionary figure of 14.69, which was down from 25.6 in the prior month and short of economists’ expectations for a level of 20.0. Offsetting any negative impact that the NY data decrease may have inspired, Industrial Production was reported up 0.4% in July, which was better than the 0.3% increase expected and the 0.2% increase in June. Consumer Sentiment as reported by Reuters & the University of Michigan fell to its lowest level since November of last year. Reported this morning at 79.2, sentiment was short of Wall Street expectations for 82.3 and below the 81.8 reading at the close of July. This is bad news for stocks, and so the SPY ETF, and should weigh on them as the day progresses.

The real bad guy in the market’s movie remains Russia. Unfortunately, even while the mysterious white aid trucks are being allowed inspection by Ukrainian officials, which is a very positive event, reports of Russian military vehicles crossing into Ukraine and building along the border offer more than enough reason for concern. It’s unclear how long the inspections will last, and what uproar a delay could cause given that Russian separatists have been without fresh water and other items for a significant period. Also, it’s uncertain whether the trucks will be allowed to pass all the way into Ukrainian rebel territory or whether they will be forced to turn over their goods to Red Cross vehicles. Still, generally, this progress is supportive of stocks and wipes away concern of Russian trickery.

However, the fact that Russian military vehicles have been seen by multiple reporters crossing into Ukraine territory is troubling. It’s a fact the Ukrainians have been complaining about and tolerating for months, yet the British Foreign Minister seemed genuinely surprised today and incensed about it. There are also reports of Russian military vehicles along the border with Ukraine again. This obviously portends trouble, especially given similarities between this situation and what occurred in the Republic of Georgia in 2008. Please thoroughly review this video of Georgia’s then President describing the situation to a CNN reporter; the similarities are uncanny. It makes the Ukraine situation simply appear to be the way Russia goes about invading the sovereign territory of its neighbors.

In conclusion, I believe traders are naively or perhaps blindly buying stocks today, which is supportive of the SPDR S&P 500 (NYSE: SPY). There is a remarkable possibility that Russia could come to the rescue of desperate Russian separatists in Eastern Ukraine and potentially occupy the region. Thus, maintaining long positions of any sort, especially in the passive SPDR S&P 500 (SPY), seems to me to be arrogant if not ignorant of the very real and present risk I see here near-term.

While recommending not holding the SPY, traders may hedge against their stock portfolios using securities like the ProShares Ultra Short S&P 500 (NYSE: SDS) or the iPath S&P VIX ST Futures (NYSE: VXX) overnight, through weekends and for short-term holding. As these securities are purely risk hedges and are costly to own, they cannot be held over long terms. Investors may also consider physical gold and the SPDR Gold Trust (NYSE: GLD), which I’ve talked about recently, as hedges against long-term issue with Russia. But, the focus of this article is the SPY ETF, which I see no reason to buy today, and would sell if held. A weekend full of risk is ahead of us. Readers are welcome to follow me to track my coverage of this security and these issues regularly.

TODAY’S MOST ACTIVE STOCKS
BIGGEST GAINERS	% Gain
Andatee China Marine Fuel (Nasdaq: AMCF)	+51%
Monster Beverage (Nasdaq: MNST)	+30%
Education Management (Nasdaq: EDMC)	+22%
Dynatronics (Nasdaq: DYNT)	+19%
Agile Therapeutics (Nasdaq: AGRX)	+17%
UBIC (Nasdaq: UBIC)	+15%
Actions Semiconductor (Nasdaq: ACTS)	+15%
Blonder Tongue (NYSE: BDR)	+15%
China Green Agriculture (NYSE: CGA)	+17%
TrovaGene (Nasdaq: TROVW)	+14%
BIGGEST LOSERS	% Drop
Vringo (Nasdaq: VRNG)	-72%
InterCloud Systems (Nasdaq: ICLDW)	-26%
Astea Int’l (Nasdaq: ATEA)	-17%
Synergy Pharmaceuticals (Nasdaq: SGYPW)	-15%
ChinaNet Online (Nasdaq: CNET)	-13%
Intelligent Systems (NYSE: INS)	-13%
Net Element (Nasdaq: NETE)	-14%
Adamis Pharmaceuticals (Nasdaq: ADMP)	-10%
Xinyuan Real Estate (NYSE: XIN)	-12%
Jewett-Cameron Trading (Nasdaq: JCTCF)	-11%

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.