Ding Dong, Your Market Correction Has Arrived

By Lloyd Khaner  APR 15, 2013 4:00 PM

"Slovenia" and "gold" join the Wall of Worry as the market pullback begins.

 


Just as almost everyone had thrown in the towel on a market correction, we are likely getting it in the chops right now. The sell-off trigger? Maybe the weakness in some global economic numbers, maybe gold’s swoon into bear market territory, or just maybe there were more sellers than buyers as we head into the heart of earnings season. Bottom line: We were overdue for a pullback in the Dow (INDEXDJX:.DJI), S&P 500 (INDEXSP:.INX), and Nasdaq (INDEXNASDAQ:.IXIC), and we all knew it.
 
For you Black Swan bird watchers, perhaps gold’s dive bomb is food for thought -- although it is likely more of a Gray Swan as plenty of people were looking for it to fall. What the markets may have overlooked was its knock-on effect on other financial assets. To this point, we also highlight that Dr. Copper and Oil  have also hit the skids as of late. These commodities carry a lot of market weight and portfolio influence so the current overall market rebalance may be more commodity related than most think.
 
The upshot is that lower prices for oil, copper, and other things we need to make the things we want ain’t such a bad thing. Critical to figure out at this junction is whether the current decline is due to flagging economic growth, a supply glut, or a bit of both. The answer to this will likely lead you to an accurate call on how big a market correction we will undergo. And when you figure it out, let me know.
 
Once again, the Wall is on the rise, adding two notches as "gold" and "Slovenia" vie for attention and fund flows. So far, they are getting the former and losing the latter. There’s never a dull moment in Marketland.

Click on the image below for an interactive version of this week's Wall of Worry, or scroll down for the text-only version.



QE: “Say hello to my little jobs report!”
 
US ECONOMY: What happened in March? Some say reality set in.

UNEMPLOYMENT: Whiff!

INVESTOR SENTIMENT: Here’s the market correction the sideliners have all been waiting for. Any takers?

HOUSING CRISIS: A severe market correction would certainly take the spring out of the spring selling season.

EUROPEAN ECONOMY: They are translating the QE handbook into French, Spanish, Italian, Portuguese, and German as you read this.

FRANCE: Maybe not the right stuff? "Uh, Hollande, we have a problem."

ARGENTINA: New millennium debt restructuring history : No. 1 in 2005, No. 2 in 2010. Will No. 3 in 2013 be the charm?

SPAIN: The European Commission targets Spain and Slovenia as the most financially troubled nations in the EU. Rough when you are grouped with a country no one really knew was a country, hey, Spain?

VOLATILITY: Not enough for you in the equity markets? Try the Bitcoin non-currency currency market. Virtual currency with the best virtual volatility you’re gonna find.

HIGH-FREQUENCY TRADING:
Lloyd: Market correction, commodity plunge, volatility jump -- what more could you ask for?
HAL: Easy. 2008.

CHINA: H7N9 bird flu strain just flew in.  SARS redo? We certainly hope not.

ITALIAN ELECTIONS: Looks like the various factions may start cooperating a bit. Now it’s time to be concerned.

GLOBAL ECONOMY: No pressure, China, but it’s all up to you.

SPENDING CUTS: Grand bargain on the way? More likely a grand illusion that’s already here.

JAPAN: Getting impatient with their no growth economy. Only took 20 years.

EARNINGS SEASON: The market is not expecting much. They better not get less than that.

DRAGHI: The euro Bernanke? The markets hope so.

NORTH KOREA: We’re waiting, unfortunately.

SEQUESTRATION: Can we get one of these things for Congress in general?

CYPRUS: Next time, just quietly put your gold for sale on a Web auction site. Got it?

UK: Condolences for the loss of the Iron Lady. Keeping a third recession in five years at bay would be a nice tribute to her.

PORTUGAL: So far, not as scary as the Cyprus situation from what I know. But it’s what I don’t know that scares me.

SLOVENIA: Welcome to the world stage! Flagging economic growth to the left, financially strapped, and in need of bailout funds to the right. Please keep moving...

GOLD: Well, it’s looking more and more like a real hard asset with a real soft price.

TERRORISM: Our thoughts and prayers go out to the good people in Boston. 

(Editor's note: This story was updated to include "Terrorism" on Tuesday, April 16.)


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.


See also:

The Basics on Bitcoin: 11 Things to Know About This Suddenly 'Hot' Digital Currency

5 Must-Watch Commodity Earnings This Week
 
Metals Melt: What Does It Mean for Stocks?
SPY, DIA, GLD

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