Equity Markets Take Body Blows and Come Back Swinging!

By Lloyd Khaner  JAN 18, 2012 11:10 AM

Investor fears ease as US major averages rise despite the downgrades in Europe.

 


The equity markets may be taking some heavy body blows -- including the rating downgrades of France and Friends, and a growing list of listless earnings reports -- but they still keep coming back for more. All major US averages -- the Dow Jones Industrial Average (^DJI), the S&P 500 (SPY), the NASDAQ (^IXIC) -- squeaked out another week in the green making it two-for-two in 2012. Halfway through the first round of this 12-month rounder, you gotta give it to the bulls so far.

The Wall of Worry has fallen to 21 blocks this week, meaning anxiety in the marketplace is only moderately high. Click on the graphic below for a specific comment about each worry facing investors this week and access to our archives of past walls. For a text-only version of this column and explanation of how it works, scroll down.




Lloyd's Wall of Worry

QE: Look for another 50 billion pounds of UK quantitative easing coming to help the Brit’s economy. Roughly equivalent to selling four or five residential properties in Kensington Palace Gardens. Oh, behave!

U.S. ECONOMY: Manufacturing continues to improve, but the economy still feels punky, so what is it that we’re manufacturing more and more of?  My buddy HW says, "Excuses."

UNEMPLOYMENT: Dropping almost as fast as “job insecurity” is rising. Thank you, Mr. Killjoy.

INVESTOR SENTIMENT: Once bitten, twice shy. Twice bitten, friggin’ pissed forever.

HOUSING CRISIS: US government preparing the mother of all programs to fix the housing market. And if that doesn’t work they’ll bring on the father.

CENTRAL BANKS:  Going “all-in” on re-liquefying and re-igniting the global economy. Might I suggest a global prayer session as well?

HUNGARY: Sending up flares, smoke signals and red flags, all with the same message – S.O.S.!!!

EUROPEAN ECONOMY: Stealth devaluation of the eurodollar setting up as a Hail Mary pass to make the eurozone globally competitive again. Hey Uncle Sam, I wonder where they got this idea from?

THE EUROPEAN UNION: Like that first weekend staying at the in-laws' place, now the real test of unity begins.

SOVEREIGN DEBT: “Gonna take a lot of love, to change the way things are…”

BOND VIGILANTES: Blood in the water! Will they finally get their prize, or will a great big government net be waiting to snatch them up…again?

GREECE: "Toot, Toot, Tootsie, Goo' Bye!"

SUMMITS: The holiday respite is over. Merkozy sit-downs, Geithner in Asia, Ahmadinejad catching some rays in Venezuela. I hear the thundering hoof sounds of hysteria-inducing headlines coming from the distance....

BANKS: Italy and Spain’s finest racing to recapitalize with equity and taking some serious pass-the-hair-tonic haircuts on their stock prices.

VOLATILITY: Xanax, Valium, Ativan, Halcion.... I don’t know who slipped the markets a Mickey Finn but keep 'em coming.

HIGH FREQUENCY TRADING:
Lloyd: I hear you bid on a hundred million dollar townhouse.
HAL: I threw in a few bids.
Lloyd: Just a few?
HAL: 78,576. Didn’t want to make waves.

CHINA: Cutting the RRR (reserve requirement ratio) 50 basis points for the first time since 2009 in an effort to stem the troika of drooping real estate, stock market and PMI numbers. Likely to keep the knife out for the rest of the year, too.

STOCK MARKET TECHNICALS: Ready to break up? Maybe but keep in mind that “Breakin’ up is hard to do…”

EARNINGS SEASON: So far, so mediocre!

CREDIT WATCH: And the winner of the most anti-climatic financial event of January 2012 goes to…The Ratings Agencies for "The Downgrade Syndrome – France, Italy, Spain & Portugal."

IRAN: Really thinking about cancelling that Strait of Hormuz family-fun cruise I booked for this year’s spring break.


What Is Lloyd's Wall of Worry?
by Lloyd Khaner

Welcome to my at-a-glance guide to the issues facing investors this week -- a unique tool for traders and money managers.

Typically the term "wall of worry,” refers to the entire body of concerns influencing stock market action. When the wall is high, meaning the market is nervous, stocks tend to get cheaper.

This wall of worry is even more specific. Every week I list the exact concerns in the marketplace and use the list to help me make buying and selling decisions. As I like to say, "Buy fear, sell cheer."

In other words, once the the wall rises above 15 blocks, start looking for deals. If the worry count sinks below 10, consider selling; prices have likely peaked.


No positions in stocks mentioned.

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