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Lloyd Khaner: Is a Big Fed Guidance Switch Coming?


"Lloyd's Wall of Worry" stays in a holding pattern at a slippery 16 worries.

There looks to be a fork in the road ahead for the US Federal Reserve and the guidance it gives the public about the metrics that will be used to govern future policy actions. It has been cruising down the 6.5% unemployment-rate highway for years, but now it looks like that may change. The new focus may be the inflation rate, a lower unemployment rate, or some other less hard-and-fast number-based value. This is big, and this is likely coming soon to a market near you.

Well, Russia did it. It took Crimea and the world is giving it a collective shame-on-you tsk-tsk, but not a lot more as of yet. As for the markets, the response was a one-day manic drop in the Dow (INDEXDJX:.DJI), S&P 500 (INDEXSP:.INX), and Nasdaq (INDEXNASDAQ:.IXIC), with a corresponding surge in the price of gold and silver. This was followed by a Maxine Nightingale market reversal to "get right back to where we started from."

The Wall stays in a holding pattern at a slippery 16 worries. This tweener-type level does leave the market vulnerable to a melt-up or meltdown depending on which way the news flow blows. So keep a finger up in the air and an eye on a weathervane because a Sam Cooke-ing "change is gonna come." It always does.

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.

Lloyd's Wall of Worry

The bear comes out of hibernation and inhales Crimea.

US FED: Probably about to change its forward guidance framework from left-brain hard numbers to right-brain soft ideas. Both sides of my brain hurt thinking about this switch.

QE: "Goodbye, Stranger, it's been nice..."

UNEMPLOYMENT: Before you raise the yet-to-be-created European Union flag in victory, remember that your unemployment rate is still 12%.

INVESTOR SENTIMENT: Some say it's frothy, but I've yet to have a cab driver give me a hot stock tip during this bull market.

EUROPEAN ECONOMY: Given the politics in Russia, is the European economy one natural gas-pipeline shutdown away from a double-dip recession? Let's not find out.

Lloyd: Investigation into your industry is starting in New York City.
HAL: We're just making the market prices more efficient.
Lloyd: For those with millions to spend on computers and location.
HAL: The view is always best in the front row.

CHINA: The more defaults it has, the more its financial system is working as it should. Right?

RETAIL SPENDING: Needs to be bailed out by a warm spring and a bounce-back by the consumer, or things are gonna get unfashionably ugly for the industry.

CONGRESS: If the Senate goes back to the GOP in the mid-terms, we are back to gridlock in Washington, DC. In other words, no change.

US ECONOMY: "Now is the winter of our discontent..."

ECB: To devalue (the euro currency) or not to devalue, that is the question.

EMERGING MARKETS: "Don't you forget about me..."

VOLATILITY: One person's volatility is another person's opportunity... to take advantage of the first person.

PMIs: March flash PMIs to be reported on Monday, March 24. What they will be or what the numbers will mean no one knows. TMI.

UKRAINE: Looks like the world's bully is at your front door. The question is, will he ring your bell?

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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Position in QQQ, GLD, GDX, GDXJ, TBF, VGK, FEZ, EUO.
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