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Stock Market 'Wall of Worry' Dropping Faster Than Barometric Pressure Before a Hurricane


It seems the summer stock market doldrums have come early, although investor complacency is now a common concern.

Well, so much for the old saying "Sell in May and go away." So far this year it's been more like "Buy in May and go to sleep." The S&P 500 (INDEXSP:.INX), Dow (INDEXDJX:.DJI), Nasdaq (INDEXNASDAQ:.IXIC), and Russell 2000 (INDEXRUSSELL:RUT) have bounced back from their recent swoons without much fanfare and without much volume. And, considering the lack of significant news on the calendar, things may stay very quiet for a spell.
Of course, one group that isn't quiet is the Complacency Choir, belting out a warning that the market's calm is setting us up for a period of intense volatility. It's hard to ferret out whether this is real insight or just wishful thinking. What is clear, though, is that the investors looking for a 10% correction in the market have become scarce. Heck, even some Federal Reserve governors are wondering aloud about the apparent rise in investor complacency.
If history tells us anything, it's that the markets don't change. Volatility and volume will come back -- the only question is when. Just like with comedy, it's all in the...t-...t-...t-...timing.
For now the Wall is dropping faster than the barometric pressure before a Cat 5 hurricane. At 16 Worries, we are nearing the Wall of Worry danger zone. We're not there yet, but a few more weeks of market sleepwalking and we might just get there.

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.

QE: As it leaves the American Theater, the Eurozone Theater starts its sneak previews.

UNEMPLOYMENT: Job quitting is up. Job openings are up. Which means confusion about the unemployment rate in the US is up.

INVESTOR SENTIMENT: "Because I'm happy, clap along if you feel like a room without a roof..."    
EUROPEAN ECONOMY: Prepare for liftoff. Or at least pray for it.

Lloyd: Ever think about settling down and becoming a fundamental investor?
HAL: What do you mean?
Lloyd: You know, learn about the company behind the ticker symbol.
HAL: That's what those letters represent!?
 "Pullin' back the reins, trying to remain, tall in the saddle..."
What happens to a consumer spending-based economy when consumers start buying to need rather than buying to want? We're about to find out.
US ECONOMY: Taking a breather...we hope.
ECB: Negative interest rates for banks parking their surplus money rather than lending it out. That's right! That just happened!!
This "the kids are too quiet in there" stock market is really unnerving the helicopter traders.
UKRAINE: Settling down, but now has that Crimean Peninsula phantom-limb pain to deal with.
RUSSIA: Can we all chip in and send them to summer camp?
US FED: Next FOMC meeting is June 18, two days before a Quadruple Witching Options Expiration Day. Recipe for volatility much?
VOLUME: "How low can you go...?"
HOUSING: The Cassandras are doing their annual "The housing recovery is over!" chant. Then again, sometimes the Cassandras are right.
US 10-YEAR TREASURY: No one thinks it's attractive, but it sure seems to be getting lots of dates.

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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Author holds positions in DIA, SPY, GLD, GDX, GDXJ, and EUO.
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