The way the stock market laughed off bad news last spring and summer is over. The market action since January 19th shows that the momentum from excessive liquidity is ebbing before the recovery can bloom. Now, the market is searching for corroboration to justify current levels. Markets have become impatient. Without these signs, the market is vulnerable to negative news. Any of the following five situations could cause the market to tumble:
1. Wednesday is a pointed economic release day. MBA Mortgage Applications, Industrial Production, Housing Starts, and the Treasury Budget can offer a surprise.
2. Although, most Americans knew February 14th as St. Valentine’s Day; in China, it was the Middle Kingdom’s Lunar New Year. President Obama is meeting with the Dalai Lama over the objection of Beijing. Sino-US tensions will only rise.
3. Greece is the word. The countdown starts to see what type of austerity program the government will embrace and will it be enough for Angela Merkel and Berlin.
4. On Thursday, Wal-Mart (WMT) reports earnings. If their earnings disappoint it could pull the market down.
5. Minneapolis Fed President Narayana Kocherlakota and St. Louis Fed President speak this week. Inflation hawk Thomas Hoenig, of the Kansas City Fed, speaks about “Avoiding a Government Debt Crisis”. One worrisome word from any speech could spook the market.
The odds of at least one surprise occurring is a certainty. Expiration Friday, notwithstanding, the repercussions could be immediate. Until the correction is over, protecting your portfolio may be in order.