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Has the Correction Ended... Or Just Started?

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What looked like a mild market pullback became a correction, launching the technical and fundamental debate as to how long, deep, and wide this one will be.

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This year's August surprise is Syria. Just when the markets were clawing back losses from the first half of the eighth month of the year (named after Augustus Caesar, Julius's great nephew), the Middle East finds a new region to heat up our summer and cool off the markets worldwide.

What looked like a mild market pullback became a correction, launching the technical and fundamental debate as to how long, deep, and wide this one will be. The S&P 500 (INDEXSP:.INX) and the Dow (INDEXDJX:.DJI) quickly knocked 5% off of their year-to-date returns and are currently stumbling around, looking for which direction to move next.

The Wall rockets higher as Syria dominates the market hand-wringing with Fed tapering and Fed Chiefing causing plenty of concern as well. For this week, the most important news item will be the BLS (Bureau of Labor Statistics) unemployment number on Friday at 8:30 a.m. EDT. We are staring at yet another potential Goldilocks situation as the Street wants job gains that are good, not too good and not too bad... though given the choice, the Street would prefer too bad, because that means that Fed tapering is less likely.

The stock market trading volumes may be low, but looking at the Wall below, the volume of stock market worries is high.

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: Who? What? Where? Who... will be the new Fed chair? What... will he or she do? Where... will the markets go in the interim?

UNEMPLOYMENT: Latest "mother of all economic numbers" hits on Friday with the BLS unemployment rate reading.

US ECONOMY: A moving target. Hopefully moving up.

INVESTOR SENTIMENT: Shaken and stirred once again.

HOUSING CRISIS: Housing prices up 12% year-over-year is the good news -- unless you don't own a home or can't get a loan; then housing prices up 12% is the bad news.

EUROPEAN ECONOMY: Sound the all-clear in Germany! The rest of the eurozone countries stand by and keep listening.

VOLATILITY: "Welcome back to that same old place that you laughed about..."

HIGH-FREQUENCY TRADING:
Lloyd: Market closes for hours, trades go wild, and even China is getting into the dysfunctional act. Never thought I'd see anything like it.
HAL: Just in time for September!

CHINA: Declares that 7.5% GDP growth for 2013 is in the bank. Which bank, we'd like to know?

GLOBAL ECONOMY: Europe to the rescue?

JAPAN: Consumption tax increase still on the table, thus ringing the "buy now!" bell in Tokyo.

SEQUESTRATION: Son of Sequester could be born in January 2014, impacting GDP and market forecasts...uhh, like now.

BONDS: The US 10-year Treasury is still the best safe haven investment around and getting cheaper every day, bargain hunters!

TECHNICALS: Is the correction over... or is it just starting?

CENTRAL BANKS: Decisions, decisions, decisions. Lots of them this week from around the globe.

THE NIKKEI: Still moving higher and "still the one..."

SHIBOR: Rock steady around 3%, but like my neighbor's pit bull, I'm not turning my back on it.

BRAZIL: Angry at the US for NSA spying on them. To wit, the Wall says, "Take a number."

SPAIN: Borrowing costs back to being nice and low, but with 25+% unemployment, who's looking for a loan?

OIL PRICES: You want inflation? Here it is.

RETAIL SPENDING: Well, we're buying back-to-school pens and pencils, but maybe not a whole lot else.

DEBT CEILING: It would be pure insanity not to lift it before mid-October. Of course, this is being decided in the Congressional asylum that is Washington, DC.

SYRIA: Our best hope may be Dennis Rodman stopping by on his way back from "hanging out" in North Korea.

EMERGING MARKETS: Investors likely waiting for magazine covers declaring them "submerging markets" before seeing a real buying opportunity.

G20 MEETING: G20 will be meeting this week in Russia. This may go down as the most fought-over dinner seating chart in history.

GERMAN ELECTIONS: Merkel looks like a shoo-in... but hey, this is September, so let's worry about it anyway.


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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LK/KCLP Ownership Disclosure: SPY, DIA, GLD, TBF.
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