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US Stocks Face the January Challenge

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Investors watch and worry: Will stocks finish the month up or down?

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Will the Dow (INDEXDJX:.DJI), S&P 500 (INDEXSP:.INX), and Nasdaq (INDEXNASDAQ:.IXIC) finish the first month of the year up or down? That is the January Challenge. This one may just come down to the wire. Market historians say that so goes January, so goes the market for the year. An up January means an up year for the market. It doesn't always hold true -- take a deep bow, Stock Market 2009 -- but it does work more often than not. Five more trading days to go…

And while you're watching the markets make a run at positive ground, you might want to brush up on your knowledge of Thailand, Ukraine, and Russia as these top the potential hot spots list for a slot on the Wall.

Thailand, well, it is under a 60-day state of emergency after some protests and some explosions. An early February election called by the Prime Minister should calm things down…or not.

Ukraine and Russia continue their big brother/little brother shoving, which may break out into a fistfight, but it's unlikely.

Lastly, the Sochi Olympics. Let's face it, when you host the winter Olympics in a beach town, you're kind of asking for trouble. I'm hoping that all the action is on the slopes and the rinks and the tracks where it belongs.

As for the January Challenge, like I said before, five more trading days to go…

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.



EARNINGS SEASON: So far the earnings are good, but the future guidance is weak. Kind of like passing your driver's test but not having a car to drive.

EMERGING MARKETS: Fears of aggressive US Fed tapering are shaking confidence in emerging market growth prospects. They are sending a not-so-subtle message to incoming Fed Chair Yeller that she's their de facto Fed Chief, too.

CURRENCIES: Weakness in the Turkish lira, Russian ruble, Thai baht, and Argentine peso, but not the euro, which is really the only one the markets want to see drop.

QE: Whether you agreed with Chairman Bernanke's policies or not, you have to admit that he's been the hardest working man in Washington, D.C. for a long, long time. For that, the Wall salutes and thanks you.

UNEMPLOYMENT: The figures say we're now in the six percents, but it sure doesn't feel that way on Main Street USA. And as Grandpa Max used to say, "Figures lie and liars figure."

INVESTOR SENTIMENT: "You've lost that lovin' feeling, oh, that lovin' feeling…"

EUROPEAN ECONOMY: Deflation fears are in the air. What will they do, what will they do?

HIGH-FREQUENCY TRADING:
Lloyd: Any thoughts on the EU lawmakers passing legislation curbing high-frequency trading on their exchanges?
HAL: Doesn't go into effect for 2.5 years. That's a millennium in my world.
Lloyd: Looks like the US is likely to follow their lead.
HAL: Not a problem.
Lloyd: Looking for office space in Asia?
HAL: Signed a lease yesterday. Kanpai!

CHINA: A key manufacturing economic indicator, the Flash PMI (Purchasing Managers Index), comes in weak again. And the markets drop…again.

EXTENDED UNEMPLOYMENT BENEFITS: Going, going…

BONDS: So much for a 4% yield on the 10-Year Treasury being a foregone conclusion. Back to guessing if we see 2.50% again and how soon.

CONSUMER CONFIDENCE: The growing use of Bitcoin tells me that the consumer lacks some confidence in something. And that something may just be the whole friggin' system.

RETAIL SPENDING: Excluding hats and gloves and coats, polar-vortexed Americans aren't spending on many other little retail goodies.

CONGRESS: It is very quiet all of a sudden. Making me very nervous all of a sudden.

US Economy: The ABI (Architectural Billings Index) droops for the second month in a row. Hard to make a case for constructing new buildings when we aren't creating a lot of jobs for folks to fill them up with.

ECB: If the eurozone economy stalls out, everything is on the table to help it -- including negative interest rates. But first, what the heck are negative interest rates?

DEBT CEILING: Tick, tick, tick…



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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Positions in SPY, DIA, QQQ, GLD, TBF, VGK, FEZ, EUO.
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