By Wallace Witkowski, MarketWatch

SAN FRANCISCO (MarketWatch) -- Flashing bearish signs in investor stock sentiment are likely to continue this week over political uncertainty in Ukraine and the resulting fallout owing to Russia's role as Western Europe's biggest energy supplier.

U.S. stocks turned in their worst weekly losses since late January with the Dow Jones Industrial Average (DJI) finishing the week down 2.4%, and the S&P 500 index (SPX) falling 2% to give up its short-lived gains for the year. The Nasdaq Composite Index (RIXF) declined 2.1% for the week but is still up 1.7% for the year.

Investors will be paying more attention to fallout from the Crimea vote more than the upcoming Federal Open Market Committee meeting or a number of housing data in the coming week, according to market strategists.

"Bullets trump everything else," said Nicholas Colas, chief market strategist at ConvergEx. "The game's not over on Sunday: It's the first inning, not the end of the game."

On Sunday, citizens of Ukraine's ethnically Russian Crimea region were set to vote on a measure to secede from Ukraine, setting up a return of the Black Sea peninsula to Russia. On Friday, U.S. Secretary of State John Kerry reiterated that the referendum is illegal and that the U.S. would not recognize its results.

Uncertainty as to how this will all play out prevented the price of oil from falling even lower, Colas said. Without the Ukraine factor, oil should have settled closer to $90 a barrel than to $100 based on weak Chinese economic data last week.

Also telling was the U.S. government putting up 5 million barrels of oil for sale from the Strategic Petroleum Reserve last week, raising the question if the "test drawdown and sale" was politically motivated in light of turmoil in Ukraine and Libya. That move and a jump in supplies also served to drive down oil prices.

Will stocks get derailed by a Russian bear?

While some strategists don't expect the referendum vote to have too much of a long-lasting effect on U.S. equities, Russia is likely to use oil and gas as leverage against Western resistance and possible sanctions from the U.S. and European Union.

"This is an exercise in political power," Colas said. "If one lever the Russians have is oil, they're going to pull that."

For its part, the CBOE Volatility Index (VIX) jumped 30% last week to finish at 17.82, its highest weekly close since Jan. 31., and highest daily close since Feb. 5. Crude oil futures for April settled up 0.7% at $98.89 on Friday, but had declined by 3.6% on the week.

Colas remarked that volatility often comes from the "smart money," and that means we're likely in for a choppy market with the VIX closer to 20 than it has been in years. The VIX, which has been well below the long-term average level for much of 2013, has widely been expected to rise the deeper we get into 2014.

Other bearish signals are evident from a recent jump in put/call ratios, according to Randy Frederick, managing director of active trading and derivatives at Charles Schwab.

"There's a whole lot of concern over Ukraine: I'm quite surprised that the market seems to be positioning to prepare for the worst," Frederick said. "Put-call ratios have turned bearish, the most bearish I've seen in quite a while."

Last week, puts (options betting the market will go down) steadily rose against calls (options betting the market will go up) and finally outnumbered them by Thursday for a put-call ratio of 1.04, the highest reading since Sept. 20, 2013, according to CBOE data. A reading over 1.0 is considered a bearish signal.

On Friday, the total put-call ratio fell back to 0.79 by the close, but the put-call ratio for exchange-traded products still remained high at 1.59, according to CBOE.

Bearishness is also manifesting itself in the form of insider selling with corporate officers and insiders showing levels of pessimism not seen in 25 years.

First Yellen-led FOMC, housing data on tap

On Wednesday, the first Federal Open Market Committee led by Fed Chairwoman Janet Yellen will wrap up its two-day meeting with a closely watched statement.

Expect Yellen to start shifting the focus of monetary policy from unemployment to keeping inflation low, Pimco's Bill Gross told MarketWatch in a recent interview. On that note, February consumer-price index data comes out on Tuesday.

Both ConvergEx's Colas and Schwab's Frederick aren't placing much weight on the FOMC meeting this week. Frederick said no one expects Yellen to diverge from the Fed's present course of action, and that recent bad weather will likely contribute to soft data. Colas said the tapering of Fed asset purchases is pretty well established and that he's more interested as to what the central bank's take on the economy will be six months from now.

Outside of the Empire state index on Monday and Philly Fed on Thursday, much of the economic data this week will center on housing with the March home builder's index on Monday, February housing starts and building permits data on Tuesday, and February existing home sales data on Thursday.

Much of that housing data is going to be suspect, however, given that crummy weather is going to be a big factor, Frederick said. A month from now, slow housing data will be much more of a concern he said. Also, two homebuilders will be reporting earnings this week with KB Home (KBH) on Wednesday and Lennar Corp. (LEN) on Thursday.

Other quarterly earnings on tap include Adobe Systems Inc. (ADBE) and Oracle Corp. (ORCL) on Tuesday; FedEx Corp.(FDX), General Mills Inc.(GIS), and Jabil Circuit Inc. (JBL) on Wednesday; ConAgra Foods Inc. (CAG) and Dow component Nike Inc. (NKE) on Thursday; along with Tiffany & Co. (TIF) and Darden Restaurants Inc. (DRI) on Friday.

More from MarketWatch:

In-the-know insiders are dumping stocks

What Sunday's Crimea vote means for markets

U.S. stocks lower on worries over Ukraine

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