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Are Technicals About to Go Bounty Hunting?

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The global indices are looking strong now, but investors shouldn't get too comfortable.

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The Volatility Index (VIX) can't catch a break, so maybe it's time to put a bounty out there for someone, or some algo computer, to make one? (Hey, look how well it worked in the NFL…until, of course, they threw the book at all the hunters.)

As we leave winter and the first quarter of the year, the major indices worldwide are pushing to new highs even with last week's mild step back in Europe (FEZ), China (FXI), and the domestic wonder triplets Dow (^DJI), S&P (SPY), and the Nasdaq (^IXIC). Don't get too comfortable, though, as the bounty hunters may use the so-called "quiet period" ahead of earnings to set some traps and fire off what's left of their ammo.

Camo anyone?

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.




Lloyd's Wall of Worry -- Text Only

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: Eurozone rate hits 10.7%, the highest its been since this indicator was introduced in 1999. Which raises the Orwellian double-think question: Why did they introduce it in the first place?

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
: German Chancellor Angela Merkel loosening the financial screws on the firewall again. Why you ask? "Pressure…under pressure…"

EUROPEAN ECONOMY: PMI – Purchasing Managers Index – drops below 50, signaling that the economy is weak. To this I add that water is wet and sand is dry.

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: Oh, Portugal? Want to come out and play…?

SPAIN:
Strapped for cash, and about to online auction everything that isn't nailed down. (Psst, Spain, don't you wish you still owned Cuba?)

TREASURY YIELDS: Surging above the 2.00% Mendoza Line and rousing the Cassandras of impending interest rate 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: Just not happening lately, so I guess "the only thing we have to fear is fear itself." And another flash crash.

HIGH FREQUENCY TRADING:
Lloyd: Lotta heat coming down on HFT lately. Any plans?
HAL: Thinking about selling in May and going away.
Lloyd: Where to?
HAL: Someplace cool, quiet, and without extradition laws.

CHINA: New member at the Misery Loves Company Club. Not to let Europe suffer alone, China's PMI sinks below 50 as well.

STOCK MARKET TECHNICALS: Blasting the warning cannons as the market's 45-degree-angle move up goes uncorrected.

IRAN: No Facebook "friends." No "likes."

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

INDIA: Quietly freaking out over internal economic glitches and mistakes.

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.

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
No positions in stocks mentioned.
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