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The Shorts are On the Ropes

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The Shorts are On the Ropes

US stocks started the Tuesday trading session on a positive note following up Monday’s solid rally. Russian President Putin’s comments on Tuesday were the catalyst for higher prices and could lead to further short covering up to the top end of the current range.

Vladimir Putin has authorized a draft treaty for Crimea to join Russia. The actions follow Putin signing a decree yesterday that recognizes Crimea’s independence, which has allowed negotiations on annexation to begin. Putin received a standing ovation when he addressed parliament, as the annexation is receiving wide spread support. The key comment during the US morning was his statement that said not to believe those who think Russia has Ukrainian interests other than Crimea. US equities immediately turned positive and will likely rally into Wednesday’s comments by new Fed Chair Janet Yellen.

US data continued to be weak. The consumer-price index, increased by 0.1% in February month over month, according to the Labor Department. Core prices, which exclude volatile food and energy costs, also rose 0.1%. Consumer prices were up 1.1% year over year. That was the weakest 12-month gain since October and below the Federal Reserve’s 2% target for annual inflation. Core prices were up 1.6% from a year earlier.

U.S. housing starts decreased 0.2% to an annual rate of 907,000, according to the Commerce Department. Building permits, a sign of future construction advanced 7.7% to an annual rate of 1.02 million last month. That was the strongest pace since October.

The S&P 500 is squeezing higher and should test resistance near 1885. A close above this level would generate additional short covering.

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