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Relax and Enjoy the Markets... Until PMI Thursday, That Is

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The Wall of Worry has dropped significantly, at least for a few days.

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MINYANVILLE ORIGINAL First things first, Fed Chair Bernanke came out throwing hard last week. We got the old heater and the old slider, but then came the curve. And it was a big, slow, hanging, sit-over-the-plate-for-so-long-and-so-steady-that-you-can-rest-an-open-cold-one-and-a-pizza-on-it-while-you-pine-tar-up-your-bat-and-take-a-from-the-heels-cut-at-it curve ball. And the markets smacked those pitches hard, especially the job growth deuce as the Dow (^DJI), S&P 500 (SPY), and PowerShares QQQ (QQQ) screamed out of the park with gold not far behind. The Fed Chief wants job growth and our guess is that he may still have a knuckle ball, a split-finger fastball, a change-up, a screwball, and a few more pitches in his arsenal. This one is going into extra innings, folks. Finally, the baseball analogies will mercifully end now.

So the Wall is dropping and markets are "Happy, Happy, Joy, Joy" for now. But at some point, like this Thursday perhaps, we get PMI (Purchasing Manager Index) numbers from the US, Europe, and China. Expectations are low, so some upside surprises could be met with more market ups. On the other hand, weaker than expected numbers might open the door to bad news being bad news again for the markets. As the Zen Master says quite often here in Wall of Worryland: "We'll see."

The Wall of Worry stands at 23 blocks this week. Click on the graphic below to reach the interactive version of Lloyd's Wall of Worry, or scroll down for a text-only column and an explanation of how it works.





Lloyd's Wall of Worry

QE:
Under the heading of "Go Strong or Go Home," the US Federal Reserve has just bolted away from home -- far, far away from home.

US ECONOMY: +1.9% GDP growth. Now that's American exceptionalism, dog!

UNEMPLOYMENT: Youth is not wasted on the young in euro land. The overall euro area unemployment rate is 11+%, with youth unemployment at 20+%.

INVESTOR SENTIMENT: Bonds sell off, equities buy on. Greed, anyone?

HOUSING CRISIS: "Could this be the magic at last, could it be magic!..."

EUROPEAN ECONOMY: With Germany's economy getting pulled south by the southern states, how about a little unsterilized "Quantitative Lockerung" (QE)?

THE EUROPEAN UNION: European stocks up, up, up. Can we go back on vacation now?

SOVEREIGN DEBT: 10-year yields in Spain and Italy flirting with sub-5% levels. If Greece goes sub-20%, I guess we can sound the all clear horn.

SPAIN: Austerity? No; austerity (with lowercase "a")? Tal vez.

VOLATILITY: Not a trace. And that makes people think we are about to get it.

HIGH FREQUENCY TRADING:
Lloyd: September already. Year's flying by.
HAL: I know. Where do the nanoseconds go?

CHINA: "Danger, Will Robinson, danger!..."

STOCK MARKET TECHNICALS: Sometimes one market pattern morphs into another market pattern. Coincidentally, this often happens when no one is quite sure exactly what's going on.

GLOBAL ECONOMY: Now, not so good. But in six months... it better be picking up.

CONSUMER CONFIDENCE: "It's beginning to look a lot like (there's going to be a) Christmas…"

US PRESIDENTIAL ELECTION: Only about $2 billion in political advertisements left to go before the big day.

THE MIDDLE EAST: Too depressing to comment on; too serious not to comment on.

THE CLIFF: Positive Fed Chair comment? Go back and check minute 55-56 of Fed Chair Bernanke's Q&A session during his September 13 FOMC press conference. I think I heard him say, "If the fiscal cliff does occur, I suspect it won't and I hope it won't..."

GREECE: Still on holiday. Swing by around New Year's.

OIL PRICES:
The Straits of Hormuz are getting crowded again -- and we ain't talking wind surfers and waverunners either.

JAPAN: Scuffling over a few islands with China. Not for nothing but the history of this kinda thing is not good.

DRAGHI: "How you like me now? How you like me now?! How you like me noooow?!!..."

ITALY: Ah, that feels better. Molto bene!



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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