Morning Comment: Did the other fellow just blink?

Back in October of 1962, in the middle of the Cuban Missile Crisis, Secretary of State Dean Rusk said, “We’re eyeball to eyeball, and I think the other fellow just blinked.” It took place when Soviet Leader Khrushchev signaled his willingness to back down from that confrontation in Cuba…and signal the beginning of the end of that crisis.

This morning, we have heard that Russian Leader Putin is citing “positive developments” in their talks with Ukraine. Given that his military seems to be ill prepared to do what it takes to reach Mr. Putin’s goals…and given the sanctions that are being imposed…and given how many global companies are pulling out of Russia (which will have long term implications for their economy if this trend is not reversed very quickly)…we just might be seeing a situation where the Russian leader has indeed blinked.

Needless to say, we are all a LONG way from drawing that conclusion in ANY definitive way. However, when we read that Russian’s richest man, Vladimiir Potanin, strongly criticized Putin’s reaction to the sanctions being imposed on Russia, you begin to wonder how much pressure he is getting from inside his country. The problem for Putin is that he will look incredibly weak if he pulls-out now. His military already looks bad. Yes, some of that can be attributed to their miscalculation about how easily they could take control of the country, but it still makes them look quite weak. Also, the success that the Ukraine forces have had in fighting back on the Russian invasion raises questions about whether they are anything close to the military power they used to be in previous decades. (It might be a big stretch to raise this question, but the perception of weakness will still be significant if Putin gives-in at such an early point in this crisis.)

Having said all this, we are not experts in the geopolitical arena, so we don’t want to go too far down this road. However, it just seems to us that Putin has too much to lose personally by caving-in at this time…and we just don’t see him “taking one for the team” in order to help Mother Russia on a longer-term basis. Therefore, we worry that it’s just another one of Putin’s dovish comments…that will quickly be followed by another thrust forward in his attacks in Ukraine.

The markets also seem to be worried that this is just another ruse to get his advisories to back off a little bit. Yes, the stock futures are trading higher this morning…but they are not skyrocketing (and they have already given back about 1/3 of their initial gains). The Treasury market hasn’t moved much at all…with the 10yr yield sitting just north of 2%. As for crude oil, it did decline after this news hit the tape, but WTI is still pretty much unchanged vs. yesterday’s close…so it has not fallen out of bed. Finally, the dollar did fall sharply when this news became public, but it has rallied back to the same level it was trading at prior the announcement as we write. In other words, it sure seems like the markets are as skeptical as we are about how much this crisis will subside over the near-term. (They must be panic in the White House, however. Who are they going to blame for the high level of inflation that existed BEFORE the crisis…and will continue to exist…even if it subsides to a certain degree with a quick resolution to the crisis in eastern Europe???)

There is little question that the markets will jump around on any new headlines we get out of eastern Europe today, so it could be another one where it bounces around like a superball thrown into a barrel. However, we’ll be watching one stock today…and in the coming days…for signs about which way the next meaningful move in the stock market will take us.

The stock is Micron (MU). As we highlighted earlier this week, the SMH semiconductor ETF is testing a key support level right now…and the action in MU could be quite important as to which way this group breaks. MU had a fabulous run in the 4th quarter last year, but the rally was not strong enough to break above its highs from last March. Instead, it rolled over in a significant way at the beginning of the year. However, it was able to bounce back nicely February…BUT this bounce ran out of steam quickly as well…at a slightly lower high than it reached in January. It got very close its early January highs, but it rolled back over in a significant way once again. The decline thin month has followed its “lower-high”…with a “lower-low” this week…and it has also taken it below its trend-line from the March 2020 lows.

The stock is trading higher this morning, along with the broad stock market futures, so maybe this will be the start of another nice rally in the stock. However, if it falls any further over the coming days and weeks, it’s going to confirm an important change in trend for MU…..Since MU has been a key stock in the chip space, its next big move should be very important for the semiconductor group as a whole. Since the group has been the most important leadership group for the market for a couple of decades, this situation could/should be important for the broad stock market as well.

Matthew J. Maley

Chief Market Strategist

Miller Tabak + Co., LLC

Founder, The Maley Report

275 Grove St. Suite 2-400

Newton, MA 02466


Although the information contained in this report (not including disclosures contained herein) has been obtained from sources we believe to be reliable, the accuracy and completeness of such information and the opinions expressed herein cannot be guaranteed. This report is for informational purposes only and under no circumstances is it to be construed as an offer to sell, or a solicitation to buy, any security. Any recommendation contained in this report may not be appropriate for all investors. Trading options is not suitable for all investors and may involve risk of loss. Additional information is available upon request or by contacting us at Miller Tabak + Co., LLC, 200 Park Ave. Suite 1700, New York, NY 10166.

Posted to The Maley Report on Mar 11, 2022 — 8:03 AM
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