Why the market isn't panicking over Ukraine

So the weekend came and went in Ukraine — Russia did not invade, bombs were not dropped but pro-Russian rebels did take eight European military inspectors hostage causing the Europeans and the U.S. to step up the rhetoric. The weakness we saw on Friday was predicated on the tension rising, so was this act enough to continue to raise the tension and cause the markets to weaken further?

Traders on the floor of the New York Stock Exchange.
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Traders on the floor of the New York Stock Exchange.

Remember — this happened three weeks ago: Friday nervousness over rhetoric that "something" was about to happen. Traders hit the SELL button. The market sold off and then we got nothing, causing the market to race higher on Monday morning. Is that what just happened again?

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You have to look at it from the larger perspective. Markets and investors do not believe that the situation will spin out of control — meaning beyond the borders. Other countries do not look to be in danger or engulfed in this crisis, and, although this is crisis enough, many investors do not see this as the catalyst for "the correction." Some pressure on the market, yes, but will it be responsible for a massive selloff? Not so much.

The pressure from Friday was more trader-related vs. large-asset-manager-related. The longer term asset manager does not react to the rhetoric so quickly. They are much more methodical — as they should be.

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The one thing that could change the game is if Putin pushes into central and western Ukraine and confrontations and bloodshed become the news of the day. Then we can expect the market to come under swift pressure. But this will be short-lived and will provide an opportunity for the longer-term investor to add to positions, while allowing shorter-term day-trader types to capitalize on the daily noise and volatility.

The broader issues this week for the market — and the ones I think will prove to be the catalyst for a selloff — will most certainly be the Federal Reserve meeting on Tuesday, first-quarter GDP on Wednesday and the nonfarm payrolls report on Friday. If the data are weak and the Fed continues to withdraw, investors will have to re-price the market.

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Investors here and around the world seem to be much more interested in the improving health of the U.S. and global economy than Putin's "army games." The Russia/Ukraine issue will remain a subplot — it will not be the catalyst for a market selloff — if there is one. However, long-term investors should realize that if it does come, it will be a gift for those who stick to the plan.

Commentary by Kenny Polcari, director of NYSE floor operations at O'Neil Securities. He is also a CNBC contributor, often appearing on "Power Lunch." Follow Kenny on Twitter @kennypolcari and visit him at kennypolcari.com.

Disclosure: The market commentary is the opinion of the author and is based on decades of industry and market experience; however no guarantee is made or implied with respect to these opinions. This commentary is not nor is it intended to be relied upon as authoritative or taken in substitution for the exercise of judgment. The comments noted herein should not be construed as an offer to sell or the solicitation of an offer to buy or sell any financial product, or an official statement or endorsement of O'Neil Securities or its affiliates.