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This Sideways Market Is Confusing Almost Everyone, but Not Insiders

By

Meanwhile the Wall of Worry is rising, as there is no shortage of issues to fret about. This week, Thailand joins that list.

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While daily gyrations have the sidewinding Dow (INDEXDJX:.DJI) and S&P 500 (INDEXSP:.INX) flat for the year, the Nasdaq (INDEXNASDAQ:.IXIC) and many investors have been flattened by the market action. Almost everyone is confused. Who isn't, you ask? The answer: insiders.
 
Believe it or not, insider buying has been pretty good for the last couple of months. Insiders tend to have a good handle on company fundamentals and business conditions. What they don't know is how the market will treat their stocks' multiples. After all, a multiple is a state of mind. Can senior executives at a company read the stock market's mind? Nobody knows for sure, but if you look at history, they are often right when they're buying.
 
Back in the land of Worry, the Wall is rising, as there is no shortage of issues to fret about. Fretting about the US housing market, the Chinese housing market, inflation rates that are too low and interest rates that are even lower, trouble in Ukraine, trouble in Thailand, GDP growth concerns all over the planet, and many more listed below. And that's without including the fact that I finished the first sentence of this paragraph with a preposition. It's a Fret Fest, folks, and everybody seems to be doing it.
 
Nevertheless, remember, the insiders are buying. No guarantee of future market ups, but it is something to think about amidst the sideways confusion and fretting of the moment.

Here's a quick look at the worries facing stock market investors. Click on the image below for an interactive version of this week's Wall of Worry, or scroll down for the text-only version and an explanation of how the Wall works.


 
QE: Hey Mr. Taper, here's your hat -- what's your hurry?
 
UNEMPLOYMENT: Now it's dropping too fast in the US. Fret, fret, fret.
 
INVESTOR SENTIMENT: Somewhat disengaged from the daily market game. And wisely so.
 
EUROPEAN ECONOMY: Good, some say. Of course, none of them are part of the 11+% who are out of work.
 
HIGH-FREQUENCY TRADING:
Lloyd: You've been quiet lately.           
HAL: Moved on.
Lloyd: To?
HAL: Currencies and fixed income.
Lloyd: You've gone global!?
HAL: Top of the world, Mom!
 
CHINA:  Intentionally cooling off its housing market. Planning to stop when every house has a nice frosty layer of ice.

RETAIL SPENDING: Retail [ree-teyl] 1. the sale of goods in a store; spend [spend] 1. to put out money to purchase an item. Definition refresher for a once-familiar phrase.
 
US ECONOMY: "Do you believe in (second half) magic...?"
 
ECB: Does the monetary cavalry have the horses to stimulate the economy? We'll know soon.
 
MOMENTUM STOCKS: Well, they've stopped going down for the most part. That's a start.
 
EMERGING MARKETS: Check out India's bolt higher. C'mon now, all you other markets; imitation is the highest form of flattery.
 
VOLATILITY: Volatility day and night, algo traders delight.
 
UKRAINE: "Hey! Teacher! Leave us kids alone!"
  
RUSSIA: Nap time...we think.
  
The US FED: "Connect the dots, la la la la, connect the dots..."
 
EARNINGS SEASON: Endless season.
  
VOLUME: Gone but not forgotten. Sigh.
 
HOUSING: Counted on and counted out by many. Hey, folks, chill -- it's only May. 
 
INFLATION: We would like a little here, a lot there, a smidge more over there, a heapin' helpin' over yonder...
 
INTEREST RATES: Any hint of them rising sends the market mercenaries scrambling into their foxholes.
 
US 10-YEAR TREASURY: As popular as ever as no one seems to be yielding to buy its 2.50% yield.
 
THAILAND: Thai Army declares Martial Law. Political turmoil -- never great news.
 

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.
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Author holds positions in: DIA, SPY, GLD, GDX, GDXJ, TBF, and EUO.
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