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The Real Deal or Another Real False Start?


"Lloyd's Wall of Worry" remains in murky territory as investors question the current market upswing.

The US economy is building a head of steam, albeit a modest one, coming into the spring, just as it has done for the last two years. But with employment and housing starts improving, this year could be the real deal.

The evidence is mixed, per usual, however. The Dow, the S&P and the Nasdaq all say the recovery is on, while Dr. Copper, silver, and the other industrial metals say no dice.

The Wall adds a couple of worries as we move into earnings season and we experience rising -- yes, I wrote rising -- Treasury yields for the first time in a long while.

This week the Wall of Worry stands at 21 blocks, meaning stocks are not overwhelmingly cheap (30+ blocks) or overwhelmingly expensive (<15 blocks), just somewhere in the foggy middle.

For more about Lloyd's Wall of Worry and an explanation of how it works, scroll down. You can also click on the graphic below for a short explanation about each of the worries facing investors this week.

QE: In my Fed, Governor Run DMC would say easing, like rhyming, is not easy -- it's tricky. "It's tricky to rock a rhyme, to rock a rhyme that's right on time, it's tricky, it's tricky, tricky tricky tricky tricky…."

US ECONOMY: False start or the real deal? "Tebowing" that we won't trip up again like we did in 2010 and 2011.

UNEMPLOYMENT: The under-employment rate drops below 15%, and the crowd goes wild!

INVESTOR SENTIMENT: Has assumed the diving position. All it needs is a good push or a greedy reason to jump into the market pool.

HOUSING CRISIS: Housing Starts estimates for 2012 bumping up against 700,000. To which I say, "Ignore the million-plus shadow inventory behind the curtain."

CENTRAL BANKS: Global liquidity surge continues as Japan gets into the act with a stated inflation target -- up, that is -- and more money going into all things Japan. The pump-fest goes into high gear as the world's biggest central banks "pump up the jam…."

EUROPEAN ECONOMY: Feeling like August already.

THE EUROPEAN UNION: Throwing money at its problems with one hand and cutting government spending with the other. There's a new Greek god being created in here someplace.

SOVEREIGN DEBT: Spring training comes to the eurozone with Greece finishing its turn in the batter's box, Portugal in the on-deck circle, Spain next, and Italy in the three-hole.

GREECE: The credit default swaps count for something after all! How much? As little as possible.

TREASURY YIELDS: Surging above the 2.00% Mendoza Line and rousing the Cassandras of impending interest rates increases at the same time.

FINANCIAL INSTITUTIONS: Financial Institution March Madness brings dividend increases and share buybacks for the winners, and balance sheet repair and austerity for the losers.

VOLATILITY: The market's volatility is perking up. I'm still trying to figure out if it's a bull or a bear in a china shop.

Lloyd: You enjoy that spike of volatility last week?
HAL: Found myself humming a happy tune for the first time this year.
Lloyd: Yeah?
HAL: "…like a flower needs the rain you know I need you…"

CHINA: Hinting at restating their numbers for the last year or so. One or two companies? One or two industries? One or two cities? Nah, the WHOLE FRIGGIN' COUNTRY.

STOCK MARKET TECHNICALS: Desperately looking for a downturn, or what I like to call a Boz Scaggs Moment. "Danger there's a breakdown dead ahead…"

IRAN: I think I figured it out -- Syria is the pin, Iran is the grenade, and the rest of the world is trying to decide what to do with both.

OIL PRICES: Nonchalant chatter about $5-per-gallon gas prices this summer. Will be followed by not-so-nonchalant chatter about a recession.

Cutting off the cotton supply to the rest of us so they have enough for themselves. I guess it's back to those itchy wool sweaters Mom used to make me wear.

EARNINGS SEASON: Let the fretting begin!

METALS: Soft patch or booby hatch?

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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No positions in stocks mentioned.
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