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Time to Put Our Stock Market Rally Hats Back on Already?

By

The most overly wished for and anticipated market correction since the 1990s was derailed. So now what?

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Did we just have another less-than-10% correction? Hard to know, but the Dow (INDEXDJX:.DJI) and the S&P (INDEXSP:.INX) are closing in on being up 20% for the year again and the Nasdaq Composite (INDEXNASDAQ:.IXIC) has vaulted over the 20% bar with ease. How can this happen with market volumes and sentiment at low levels? Allow me to offer up the US equity markets for the last five years as Exhibit A.

So what derailed the most overly wished for and anticipated market correction since the 1990s? The best guess is the pressing of the pause button on the military strike on Syria. This situation is being played out in the markets, in Washington, on the Internet, on TV, in the UN, in Russia, and of course, in the Middle East. Still a bit of a jump ball how it ends, but for now, we seem to be in a holding pattern and the markets may take a wait-and-see approach as well.

Not to be forgotten is that September is historically the worst month for the equity markets. Which really means nothing more than people are usually looking for a reason to sell stocks because that's what has happened in the past. Call it behavioral finance, call it market psychology, or just call it what it is: September.

P.S. October is only slightly better and the undisputed holder of the Most Market Crashes record. Someone just blink us to November, please.

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: Monetary trivia-geek question: When is the last time a president from the Democratic Party named a new Fed chief? Answer: Jimmy Carter named Paul Volcker in 1979.

UNEMPLOYMENT: More people dropped out of the workforce. Whew!

US ECONOMY: A moving target. Hopefully moving up.

INVESTOR SENTIMENT: Money coming into mutual funds and out of ETFs, therefore market sentiment confusion staying put.

HOUSING CRISIS: This entry is coming off the Wall soon, so if anyone has any reason why this worry should be kept on the WoW, let them speak now or forever hold their fretting.

EUROPEAN ECONOMY: If it ain't getting worser, it's getting better…I hope.

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

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

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

GLOBAL ECONOMY: Sure would be a buzzkill if we got an oil price spike right about now.

JAPAN: Gets the 2020 Olympics. Does that mean it has to keep its economy levitated for the next six years?

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

BONDS: Three percent hit! Do I hear 3.10%? Do I hear 3.10%? 3.10%, going once, going twice…

CENTRAL BANKS: Pouring more fuel on the monetary fire.

MORTGAGES: Demand for them in the US seemingly still on August break.

FRANCE: The Battle Royale With Cheese. Which is worse, their political situation or their economic situation?

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: Sending a big "Nah nah nah nah nahhh nahhh" to Italy as their 10-year bond yields drop below those of their EU cousin to the east.

OIL PRICES: You want inflation? Here it is.

RETAIL SPENDING: If the nonstop shopping sprees have ended in the US, what are people doing with their weekends, weeknights, and weekdays?

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: I think the US just hit a giant pause button.

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

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, QQQ, GLD, TBF
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