2022.02.28 Weekly Note

8 min readFeb 27, 2022

Typical bear market rally?

What an exhausting week that was to be trading and it will probably be another hectic week of headline driven markets. For that reason, I won’t be taking a deep dive into the charts. Focusing on the Ukraine-Russia conflict for the review of weekend news…



  • Putin puts nuclear forces on high alert, escalating tensions (APnews) Putin ordered Russian nuclear forces put on high alert Sunday in response to what he called “aggressive statements” by leading NATO powers
  • Russian State Media Bolster Putin’s Narrative for Ukraine Invasion (WSJ) Outlets amplify claims that Kyiv is the aggressor and that Russia is acting to protect its security
  • Russia restricts social media access (BBC) limited Twitter in parts of Russia, restricted Facebook after a clash over “censorship”
  • Russia Blocks U.N. Bid to End Ukraine Conflict; China Abstains From Vote (WSJ) no country on the council was willing to side completely with Moscow
  • Russians Rush for Dollars as Sanctions Threaten Ruble Collapse (Bloomberg) Russians lined up at cash machines around the country to withdraw foreign currency as new sanctions to punish the Kremlin for its invasion of Ukraine sparked fear the ruble could collapse


  • Ukraine Holds Kyiv, Battle for Kharkiv (Barron’s) Ukraine’s defenders held on to the country’s capital, Kyiv, on the fourth day of Russia’s invasion and engaged in urban combat in its second-largest city, Kharkiv
  • Ordinary Ukrainians Rally to Defend Homeland From Russia (WSJ) Thousands of civilian fighters volunteer their service, including many from abroad, as authorities distribute rifles and others assemble Molotov cocktails and coordinate support
  • Crisis at European Borders as 350,000 Ukrainians Flee Russian Invasion (VOA) could force as many as 4 million Ukrainians to flee their country, the United Nations said this week, spawning one of the worst refugee crises in Europe in more than 70 years
  • Ukraine Crypto Donations Pour In After Russian Invasion (Bloomberg) Ukrainian officials are directly soliciting crypto donations, adding to crowdfunding efforts that have raised more than $5 million in Bitcoin, Ether and other tokens since Friday


  • West to cut some Russian banks off from Swift (BBC) Russia is heavily reliant on the Swift system for its key oil and gas exports
  • EU, U.K., Canada, U.S. Plan to Cut Some Russian Banks From Swift (WSJ) and would take actions to prevent Russia’s central bank deploying its more than $600 billion in reserves to help Russia’s economy
  • EU Proposes Sanctions on Some of Russia’s Wealthiest Tycoon (Bloomberg) European Union is discussing sanctioning some of Russia’s wealthiest tycoons as well as top officials in state companies and media
  • Russia Sanctions Over Ukraine Largely Spare Energy Sector, Vital to Europe (WSJ) Exemptions let Europe keep buying Russian gas and oil, moderating prices while maintaining a major revenue stream for Moscow
  • As sanctions start, Russia’s trade flow shifting towards China (Reuters) A review of World Bank and United Nations trade data shows that since lesser sanctions were imposed in 2014 after Russia annexed Ukraine’s Crimea, China has emerged as its biggest export destination. New sanctions could prompt Russia to try to deepen its non-dollar denominated trade ties with Beijing in an effort to skirt the restriction


  • EU to Fund Buying Weapons for First Time (WSJ) EU extended to Belarus its sanctions on Russia, banned the entry of Russian planes into EU airspace, will for the first time buy weapons and will ban Russian media outlets
  • Germany to Boost Military Spending in Latest Historic Shift (Bloomberg) Germany will channel 100 billion euros ($113 billion) this year into a fund to modernize the military. By 2024, the government will spend at least 2% of gross domestic product each year on defense, he added, in line with a NATO target that Berlin has consistently failed to meet
  • Germany to send weapons directly to Ukraine (BBC) sending 1,000 anti-tank weapons and 500 Stinger missiles
  • Russian cargo ship seized in the English Channel (CNBC) France on Saturday intercepted a Russian vessel in the English Channel in line with new EU sanctions against Moscow “suspected of belonging to a Russian company that is currently on a sanctions list by the EU”
  • Turkey Says War Exists in Black Sea, Allowing It to Block Russian Navy (WSJ) Turkey’s foreign minister said Sunday that the situation in Ukraine had become a war, a legal distinction that paves the way for Ankara to potentially ban Russian warships from entering the Black Sea through a strategic chokepoint
  • Worldwide Protests in Support of Ukraine (TheMoscowTimes) Pro-Ukraine demonstrations erupted across the world Saturday, as thousands took to the streets from London to New York to Tehran to denounce Russia’s assault on its neighbor
  • Musk Activates Starlink Satellites in Response to Ukraine Plea (Bloomberg) Elon Musk said his Starlink satellite service is up and running in Ukraine, responding to a plea from the deputy prime minister to supply satellite-based communications to help resist Russia’s invasion of the country.
  • Putin, black belt in judo, suspended as honorary president of International Judo Federation (WashingtonPost) International Judo Federation said in a statement Sunday that it was suspending Russian President Vladimir Putin as its honorary president and ambassador, citing the “ongoing war conflict in Ukraine”
  • Putin Won’t Sportswash His Way Out of Ukraine This Time (BloombergOpinion) Whatever the outcome of Vladimir Putin’s war on Ukraine, there is one theater in which the Russian president is already losing: Sports


The week had closed with a risk-on profile — higher beta currencies outperformed, Equity markets produced a very strong bounce, Bonds selling stalled with yields finishing higher, and Commodities also broadly positive but came with a sharp reversal presumably on the news of Russia is willing to hold talks.


American markets US Canada and Brazil were the only indices to finish positive last week on this list. This makes me believe in the idea that the huge late week reversal was essentially a positioning squeeze.

Defensive sectors — Real Estate, Healthcare and Utilities outperformed. Consumer sectors was the worst performing possibly due to potentially higher supply chain shortages and costs as a result of the Ukraine conflict. Financials also underperformed and likely to have been affected by the SWIFT sanctions and potential stress brewing in credit markets.

SPX dealer gamma still negative and we could therefore see some accelerated selling if spot trades back below 4300, which is only about 2% away.

Last week I highlighted that SPX ATM vols remained elevated while risk premiums took a dive (Blue arrow) due to the huge options expiry. Vols are still elevated while premiums have start to bid back up highlighting put protection is very much in demand, even as equities made a monster reversal — SPX +6.56% and NDX +8.63% off the lows!!


US yields moved higher last week, particularly in the front end.

Eurodollar spreads are mostly unchanged over the past 2 weeks. Some seem to believe the FED will be less hawkish as a result of the Ukraine invasion, but I doubt that to be true since the invasion is likely to exert more upward pressure on prices and sustain inflationary pressures. Meanwhile recent data seems to suggest consumers have been willing to pay it whether they like it or not.


Commodities still on a tear and I don’t see signs of this rally letting up, i.e. no sign of geopolitical tensions easing in the near future. I’ve mentioned long Agriculture and Energy commodities as being one of the most obvious trades for the year and while I still believe that to be true, I’m starting to think the long trade could fizzle out well before year-end with recession risks brought forward as a result of the Ukraine conflict making matters worse (extremely strong price pressures against slowing growth) and therefore stall or even reverse some of the recovery from the pandemic.


Very weak open for currencies — USD bid across the board, EUR, higher betas especially Scandies the worst hit.

GBP was the worst performing on index view with a bearish engulfing weekly bar, while EUR index looks poised to take out 3month lows to levels last seen 2 years ago. Commodity dollars have rallied into a pivot area and looks ready to turn lower from these levels.

EMFX has been holding up surprising well so far this year but starting to show some hints they could be rolling over from here and I think there is a stronger case for it now with global recession risks brought forward as result of the Ukraine invasion.



  • Staying short Nasdaq —I have covered about 1/3rd and probably should have covered a lot more in hindsight last Thursday. Also traded a tactical long for a few hundred points and looked for an opportunity to fade the rally on Friday. Unfortunately I didn’t quite get the extended price action I was looking for beyond 14150 and will be looking to reload some shorts this week.
  • Staying short EURUSD and EURJPY — haven’t touched the positions since going short a few weeks ago:
  • AUDNZD short — starting to lose faith in the idea mainly due to the headwinds from AUD’s terms of trade benefiting from the higher commodity prices. Technically still looks reasonably good, and so does the stance of respective central banks to support the move in rate differentials and the cross. Happy to hold onto it for now.


  • I’m keen on the short energy theme which have been the strongest performers in recent months. I’m also keen on buying the dip in SEK as it looks extremely cheap especially with economic data coming in hot and domestic inflation surprising to the upside. Therefore I’ve got NOKSEK and EURSEK shorts on the radar and waiting for geopol risks to ease.
  • Long US Exceptionalism — Looking beyond the Ukraine invasion and it’s impact on global markets for the year ahead, I think the US will become a TINA destination for global fund flows once risk settles and US equities has had a meaningful correction (into the 2021 ranges). US has proven resilient during periods of heightened global risks, and with Central Bank’s around the world having to fight price pressures with recessionary risks brought forward as a result of geopolitical risks, I think US large-cap quality names will outperform.

Have a good week trading!