Ukraine Will Dictate Near-Term Action, Though There Are Signs of Bottoming

Stocks are set to bounce here on Wednesday morning, but headlines about the Ukraine crisis will determine the trajectory of the action. A second round of talks is supposed to take place between Russia and Ukraine today, and the results of that meeting are likely to move the market.

Market participants are still trying to sort out the impact of sanctions and the movement in bonds. Oil and commodities exploded higher Tuesday, and there is still the potential for sanctions that will tighten the energy market even further.

The odds of a rate hike in March have been falling. Not long ago, the chance of a half-point hike went from around 10% to 100%. They have fallen back to under 10% again as the belief grows that the Fed will be hesitant to do much while the uncertainty of the Ukraine crisis is overhanging the economy and the markets.

President Biden's State of the Union address did not appear to hold any surprises for the market. All that really matters right now is the Ukraine crisis and energy prices. There will continue to be a very intense debate over increasing production.

Overall market conditions are very uncertain right now, but there are some signs of bottoming in various areas. Retail is looking much better on moves by Target (TGT) and Nordstrom (JWN) , and the number of stocks making new 12-month lows is diverging from the indexes. Biotechnology had some good relative strength on Tuesday, and there were a good number of small-caps that were up 10% even as the indexes were hit.

I'm optimistic that a bottom is developing, but we need more work. I am slowly trying to deploy more capital and want to take advantage of the volatility that the Ukraine crisis creates as the market develops.

We will see if this opening bounce holds and what the reaction is to talks between Russia and Ukraine.