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Attention Investors: A Watched Market Never Boils


The Wall of Worry looks set to fall further, but only if the situations in Europe and Iran remain stable.

Call it market rule No. 1: A watched pot never boils. In this case the watched pot is the stock market and the boiling is the long-awaited correction that has yet to materialize. So far the Dow (^DJI), SPX (^GSPC), and Nasdaq (^IXIC) boiling points have not been reached. Heck, I'm not sure you can even see any tiny bubbles forming in there yet. The Wall drops a Worry to the 20-level down from 29 at the end of November 2011, seemingly with an eye to become a teenager ASAP so long as Europe holds together and Iran doesn't fall apart.

Click on the graphic below for a specific comment about each worry still facing investors 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 (Text only)

QE: China's turn as it cuts its RRR (reserve requirement ratio) rate for banks over the long weekend continuing the "when in doubt, pump it out" strategy of global bank policy.

US ECONOMY: Hard to believe, hard to see, but it's "Feelin' stronger every day…"

UNEMPLOYMENT: The US rate doing its best impersonation of Benjamin Button as it moves down the 8% range toward being a 7-percenter.

INVESTOR SENTIMENT: The worm is turning positive again because as we all know, "Greed is good…"

HOUSING CRISIS: We give. Uncle. Tap out. White flat. Throw in the towel. Concession call. What was that safe word again...?

CENTRAL BANKS: In the process of buying every piece of flimsy debt paper they can find. Who will they sell it too? Details, details….

EUROPEAN ECONOMY: Weak and perhaps worse than expected, but economic estimates for its comeback in the 2020s are pretty much above average. So why all the worry?

THE EUROPEAN UNION: All for one and all for austerity! Except Germany, that is. Hey EU, who's your daddy!?

SOVEREIGN DEBT: Probably worth at least the paper it's written on. But only because they use fancy ink and holograms and stuff.

JAPAN: Fourth-quarter GDP comes in at negative 2.3% -- surprisingly worse than the Hello Kitty Happy Time Department of Lithium thought it would be.

GREECE: Hoping to raise some needed cash by offering daily rentals of the Acropolis, Temple of Poseidon, and Delphi just in time for the heavy Bar/Bat Mitzvah and wedding seasons. Marketing pitch: "Add a little Oopah! to your Hava Negila Chicken Dance!"

SUMMITS/MEETINGS: Mark your calendars – February 27 Germany may vote on approving the Greek bailout package...or it may not as it doesn't seem very pressing to them.

BANKS: "All we need is lending, ya-da-da-da-da, all we need is lending, ya-da-da-da-da, all we need is len-ding, lending is all we need…lending is all we need…"

VOLATILITY: Traders looking for a Hail Mary pass to get it up again and hoping the outcome is better than the Super Bowl XLVI last-second Brady variety.

Lloyd: There's a fundamental analyst coming in to talk. You want to sit in?
HAL: I'm pure technical. No "fun" in fundamentals from where I stand.
Lloyd: How is your strategy holding up this year?
HAL: No "nickels" in technicals either.

CHINA: As the world awaits junkets of Chinese citizens to swoop in and buy up blocks of languishing city real estate, the value of Chinese property in China has been in steady decline for about a year now. Guess they didn't get the memo.

STOCK MARKET TECHNICALS: Overwrought? Possibly. Overthought? Likely. Overbought? Definitely

EARNINGS SEASON: Are we done yet!? Nope, "A little bit mo'…"

CREDIT WATCH: Rumor is the sun has just put planet Earth on watch for a downgrade to Pluto-like "Ice Dwarf" status.

IRAN: Has officially cut off oil sales to Britain and France and is eyeing a shutdown of exports to the rest of Europe. To wit, the eurozone remarked, "Die hose habe ich verlassen, Saudi Arabia's telefonnummer?" ("Which pair of slacks did I leave Saudi Arabia's phone number in?")

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.

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
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No positions in stocks mentioned.
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