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What's Out There That Could Knock the Confidence Out of These Markets?


US stock market action has been like a giant slalom, and it's not going to get easier.

Sochi, Russia, has got nothing on Wall Street as the stock market is hitting the slopes on a daily basis. Some days up, some days down, some days it's a jump, some days it's a hairpin turn, but for sure, every day the action is fast.

This is clearly a market environment that favors experience, confidence, steady nerves, and a passion for opportunity -- opportunity to buy them down, sell them up, or hold on and enjoy the ride. Get used to it because it looks like this giant slalom course could run a full 12 months before we get to the finish line.

Just one week ago the Dow (INDEXDJX:.DJI), S&P 500 (INDEXSP:.INX), and Nasdaq (INDEXNASDAQ:.IXIC) were cascading toward full-fledged 10% market corrections, but it was not to be. Doesn't mean that they won't get back at it, but with the debt-ceiling issue out fo the way and new Fed Chair Yellen at the con (read: "control" -- see Crimson Tide) the markets have regained their buy-the-dips mojo.

So what's out there that could really knock the confidence out of the markets? GDP weakness from the US, Europe, Japan, and China. Short of a full-blown emerging market meltdown, it looks like 2014 will be all about economic growth here, there, and everywhere.

Get your helmet, googles, boots, skis, poles, and shiny spandex on, because we are only 12.5% down this slalom run and it ain't gonna get any easier.

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: Ben Bernanke-to-Janet Yellen hand-off is complete. "It's the same old song, but with a different meaning since you've been gone..."

UNEMPLOYMENT: The goal of a 6.5% level in the US doesn't count if it comes by way of workforce dropouts, low-paying jobs, and most of all before the Fed wants it to be reached.

INVESTOR SENTIMENT: Not just buying the dips, levering up to buy the dips.

EUROPEAN ECONOMY: The world is counting on you this year to put some economic growth up on the scoreboard. Maybe the word "praying" is more accurate.

Lloyd: So I hear the trading arms race is turning to laser beams to get the edge.
HAL: Speed kills it!
Lloyd: Actually I think the expression is "speed kills."
HAL: Yup, but only if you don't come in first place...
Lloyd: And the yellow caution flag comes out...

CHINA: Trade data strong, manufacturing data weak, comprehending data... confusing.

EXTENDED UNEMPLOYMENT BENEFITS: "Although we've come to the end of the road, still I can't let go, it's unnatural, you belong to me, I belong to you..."

BONDS: Back in vogue! Or at least they were for a month when the stock market was on vacation. Now, out of style once again.

RETAIL SPENDING: Find a store that sells a product that adds 10 degrees on the thermometer and no snow for a month and it will comp like a banshee.

CONGRESS: Can you imagine if members go beyond just doing no harm and actually do something positive? "I'll meet you at the dreamers ball..."

US Economy: The Ayes don't have it as the PMI and the ISM hit the skids.

EUROPEAN CENTRAL BANK: Monetary stimulus standoff as it looks like it's coming down to Mario Draghi vs.The German Constitutional Court. Who will blink first?

EARNINGS SEASON: Have almost made bye-bye...

EMERGING MARKETS: "Sending out an S.O.S to the world...."

CURRENCIES: Carry trade carrying many away.

VOLATILITY: The Winter Olympics come to Wall Street as every day feels like a giant slalom run.

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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