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How Long Can the Correction in Equities Be Delayed?


The market rallies on despite a meteor crash and a near-asteroid hit. Investors are wondering when stocks will start responding to unfavorable news.

This I have never seen: The bears and the market naysayers have gone interstellar to hurl negativity on equities. So far, stocks remain Teflon coated. Tepid earnings season... nah. Low trading volumes... nope. Potential for a higher minimum wage rate... nein. How about a massive cut to defense spending? Not even. So there's only one thing left to try. Start throwing rocks, big rocks from other galaxies. Ground impact, yes; market impact, not even a hiccup.

The markets have got ups in them for now as the S&P 500 (INDEXSP:.INX) logged yet another positive week, though barely, while the Dow (INDEXDJX:.DJI) and the Nasdaq (INDEXNASDAQ:.IXIC) show plenty of resolve. The technicians are crying foul as for the last umpty-ump years we would have seen a correction by now. I do agree that we will see a correction in the equity market. I also know for sure that I don't know from what level it will start from.

The Wall drops a notch to twenty-two and there may be more downside here (a market positive) to come. Not to fear, I will stay vigilant as always as I train my extra-universal telescope on the far beyond for new worries. Get comfortable -- this may take a while.

Click on the image below for an interactive version of this week's Wall of Worry, or scroll down for the text-only version.

QE: Beginning of the beginning of the end of QE? FOMC minutes from last meeting hit on Wednesday.

US ECONOMY: The latest figures say it's improving. But as Grandpa Max used to say, "Figures lie and liars figure."

UNEMPLOYMENT: Yet another Initial jobless claims number this week. Yet another moment to ponder exactly what that number represents.

INVESTOR SENTIMENT: Greed has dusted itself off and looks like it may be ready to get back into the race.

HOUSING CRISIS: Spring selling season starts soon. I wonder if there is an alliteration season?

EUROPEAN ECONOMY: The EU nations to Draghi: "Scotty, you've got to get me more maneuvering power!"

CONSUMER SENTIMENT: You know it's a concern when you see it slogging along in China, the land of the effervescent spender.

SOVEREIGN DEBT: "Life ain't so bad at all, live your life off the wall..." Hard to believe, but it's likely time to say our goodbyes here for now.

SPAIN: Accusations flying that influence with political party officials was purchased with pay-offs, hand-outs, and bags of money. For those of you scratching your heads, yes, that is still mostly illegal in most parts of the free world.

VOLATILITY: Lack of it is not fair! As the cries from the shorts, the outsiders, and underinvested are getting more and more manic.

Lloyd: You've been quiet lately.
HAL: Got no mojo with all this low volume.
Lloyd: Kind of a low-T thing for a computer?
HAL: Yeah. You think getting matching bathtubs for me and the missus would help?

CHINA: Continuing to tap the brakes on their red hot real estate market. Unfortunately, the rest of us may suffer a launch through our windshields as we continue to tailgate their economic growth.

ITALIAN ELECTIONS: Berlusconi inching up in the polls. Really, really?

GLOBAL ECONOMY: Expectations for 2013 keep coming down as markets keep going up. There's always 2014, right?

SPENDING CUTS: Ex-sequestration (see below), this is looking like this is going to be another "nothing done" trade by our elected (for now) officials.

JAPAN: Abenomics lets the good times roll! Or perhaps just gets them started.

FLASH PMIs: Better be flashing green for February in the US, China, and Europe.

DRAGHI: States that economic growth risks are still "skewed to the downside." Let's hope he never has to change that first word to "skewered."

EARNINGS SEASON: This week is the last gasp. And next week starts pre-announcement season. Never a dull moment, folks.

SEQUESTRATION: Unless cooler heads (read: cooler heads with brains in them) prevail soon, the cuts are coming swift and hard. Might just be the only way to get us back on track.

US CONGRESS: Can someone give these folks some PEDs or deer antler spray?

US PRESIDENT: Got control of the wheel of the US economy car. All we ask is that you please keep us on the road.

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.

Also see:

Why Stocks Are Ignoring All Reliable Market Indicators, and How to Trade Anyway

10 Things You Need to Know for Tuesday

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