WHY CHAOS IN EGYPT DOESN'T MEAN CHAOS IN THE US STOCK MARKET

Wait a minute. The stock market is actually UP on Monday 1/31/2011 after we all watched a weekend of wall to wall coverage of the crisis in Egypt. How can the market be going up when there is obviously so much uncertainty and danger in that part of the world?

I have to admit I thought the stock market would be down big today as there is one thing investors hate: uncertainty.

There is so much uncertainty about Egypt right now that no one knows what is going to happen, knows what could happen, or knows what to do about it. We have hardly heard a peep out of President Obama as he doesn't know what side to back or what to say either so he is just waiting and watching like the rest of us. (well maybe he is doing a little more than that)

There are questions about the Suez Canal and whether it will be able to stay open and let ships through. If not, that would impact business worldwide. There are questions about what type of government would take the place of the current pro US regime there now if it falls. There are deep implications regarding any new Egyptian government and Israel and that also will affect the whole world. It could all eventually lead to another war between who knows how many countries.

Why isn't the US stock market going lower today? The biggest reason is probably because people have gotten over the shock of the news over the weekend. If there was any panic here in the US it would have been on Saturday and the markets were closed that day. So now, people have had a chance to digest everything and they might not feel it will have quite as big an impact on us as they might have thought on Friday or Saturday.

Investors might also see the news that Mubarak has formed a new cabinet and is working to stay in power and get things under control. This would have a calming effect on investors as they are less likely to panic and sell based on improving news. As long as Mubarak stays in power, the market will likely not nosedive.

There is also a good economic news story or two out today such as this one about consumer spending having gone up in December for the sixth straight month. Any good economic news will help stabilize the market and there are more economic numbers out later in the week for jobs, automobile sales, factory orders, and construction spending. These numbers could have a big effect on which way the market goes along with developments in Egypt of course.

One of the things that is made clear today is that the direction the stock market moves, either up or down, is very much determined by the way people FEEL about things. Today was a classic day where the market COULD have opened down 200 to 500 points based solely on what is happening in Egypt. However, because investors don't apparently think the situation is quite as bad as I thought they would, the market opened up and remains up at midday.