6 Straight Months of Market Gains. Will We Make It a Lucky 7?

By Lloyd Khaner  JUN 05, 2013 1:25 PM

Friday's job numbers have to be not too hot and not too cold. Meanwhile, investors are also watching the events in Turkey with trepidation.

 


Par-ty! So says the Dow (INDEXDJX:.DJI), the S&P (INDEXSP:.INX), and the Nasdaq (INDEXNASDAQ:.IXIC), as they have each just logged their sixth straight monthly gain. But, oh, how those 120 days of bliss came to a halt when June rolled in. We still have a lot of month ahead of us and the drop so far has been small, so the all-out collapse in investor sentiment may be a bit premature. 
 
We should know more on Friday when the jobs numbers come in. We all want more job creation…just not too much more or fears of an early end to QE might rock the markets. We use the Wall of Worry Employment “Mendoza Line” of plus-200,000 in job creation as our measuring stick. If the number comes in a bit below it, the markets should be fine, a bit above it, and the markets should be fine. However, if we come in way too low or way too high (like anything near 300,000), it’s going to be a strange day. I’m not sure what kind of strange, but not your typical lazy Friday in June. 
 
So if the jobs number hits the Wall and doesn’t stick, will money rush back into bonds? (They’ve been losing money faster than sloshed Uncle Vern at the $100 roulette table.)

Maybe the smart money goes back to flipping condos in South Beach? Not likely. Gold, art, collectible plates? I just don’t know, and hopefully we won’t have to find out. See you Friday…

This week's Wall stands at 20 blocks. Scroll down for the text-only version and an explanation of how it works.
 


QE: Tapering, meaning “to make smaller gradually” according to the Free Dictionary, will be the word du jour for many jours to come.
 
US ECONOMY: ISM manufacturing reading drops below the critical 50 level. “I hate when that happens…”
 
UNEMPLOYMENT: Another Jobs Friday on the horizon where adding less than 100,000 is too cold, adding more than 225,000 is too hot, and figure 180,000 is just right for this Goldilocks stock market.
 
INVESTOR SENTIMENT: One bad week, the last one, and it drops like a rock. Oh, ye of justifiably little faith.
 
HOUSING CRISIS: When is the last time the words “prices” and “surging” were used in the same sentence or paragraph or epic novel? It’s starting to happen, folks.
 
EUROPEAN ECONOMY: Stalwart Germany experiencing an “I feel your pain” moment as its unemployment rate flirts with busting through the 7.0% level.
 
FRANCE: The EU strongly suggesting economic reforms to spur growth. And for the record, that does not mean reducing work week hours or raising taxes.
 
US EXECUTIVE BRANCH: Giving Congress an excuse to investigate everything except how to write desperately needed fiscal policy legislation. Sigh.
 
SPAIN: Calls for them to cut their debt load or else! To which Spain chirps, “But baby, I ain’t got no money, honey…”
 
VOLATILITY: “Welcome to the Tokyo Casino, where the best action is at the Japanese Equity Market tables in the back on the right, ladies and gents.”

HIGH FREQUENCY TRADING:
Lloyd: You take a look at the Japanese stock market lately?
HAL: Hai! (Yes)
Lloyd: And?
HAL: Kampai! (Cheers!)
Lloyd: Time for me to learn Japanese?
HAL: Kampai! Kampai!
 
CHINA: Still not making any moves to stimulate their economy. Now you choose to become disciplined, long-term minded, sensible managers of your country!?!
 
GLOBAL ECONOMY: Ho-hum, and let’s hope it at least stays this way.
 
JAPAN: Will Abenomics work? Maybe, but first we have to figure out what it is.

DRAGHI: Getting a little push back from some members of the ECB. Hope they know that bumblebees don’t only make honey, they also sting when bothered too much.
 
SEQUESTRATION: It's working so well to reduce our deficit that it has virtually eliminated the chance for a grand bargain, a swell bargain, or even a buy one, get one free bargain.
 
BONDS: Holy negative returns, Batman! My bond portfolio just had its worst month since 2008. You mean you can lose money with these things?!
 
SYRIA: Rumor has it that President Obama asked for a no-fly zone over this civil warring nation.
 
CENTRAL BANKS: The Grand Experiment has begun as almost all of the major central banks worldwide (the US Fed, the European Central Bank, the Bank of Japan, and the Bank of England) join together to drop cash from their respective helicopters. Hey, China? Buy a whirlybird and join the party.
 
TURKEY: What has 80 million people, the 16th largest economy in the world, and enough history behind it to destabilize a barely stable world?
 
 
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.
LK/KCLP Ownership Disclosure: SPY, DIA, GLD

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