Art Cashin, director of floor operations at UBS, offered CNBC his insights.
Generally, "we're living in an environment where a lot of portfolio managers are underweighted," Cashin explained. The managers were "waiting for a pullback that never came" and now "they have nothing to show for."
Cashin said "one of the reasons for these late-day surges" is fund managers' desperation: "You've got to hold your nose and buy'em."
What does he expect going forward?
"I think — as I said when you had Byron Wein on — you might get as much as a 10 percent overtrade here. But if we went up another 1,000 points on the Dow, I would head directly to the bomb shelter."
The above from subscriber BD, trying to find "reason" for the euphoria. Sadly, the above answer may be a large part of the late day surges, as shorts also cover themselves, and we create a negative cycle of upturn.
Friday showed an opening swing and a progression of whipsaw throughout the day that shows the struggle in the market.
"U.S. stocks climbed on Friday after a report that showed a marked slowing in the pace of job losses.
Shortly after the opening bell, the Dow Jones Industrial Average was higher by about 76 points, driven by Alcoa, up 5%, Boeing, which rose 4%, and Bank of America, which rose 2.7%. The blue-chip benchmark turned positive for the year, up about 0.6% for 2009 in recent trading.
The S&P 500-stock index was up 1%, bolstered by gains in its financial and its industrial sectors. The Nasdaq Composite Index climbed 0.8%.
Nonfarm payrolls slid 345,000 in May, the Labor Department said, well below the 525,000 decline economists expected and the smallest fall since September 2008, when the recession intensified after the demise of Lehman Brothers. The unemployment rate jumped 0.5 percentage point to 9.4%, highest since August 1983. Economists had expected a 9.2% rate."
Allow Floyd to translate: Unemployment hit highs we've not reached since 1933. The pace of jobs statistically shows a "more positive decline," which to Floydian logic means the BEST jobs available for many right now are at $12.00 hour.
What this shows, the immediate 86 point run up in 20 minutes, at opening Friday showed the strength of the bull thinking, and allows many chartists to begin seeing new tops at 9150.
As you review this market it is important to not let personal prejudice enter the thinking ("the market should not do this", or "I'll double my positions I'm so sure of this") as any rally must be suspect after a certain number of days, as consolidation is healthy for a growing market.
And from a long term trader, a CPA, wrote to talk about Friday and what he learned:
I just wanted to thank you for your service. By giving me tools and knowledge of the market to use, this morning I was able to avoid panic selling my June OEX $435 put for a 40% loss. I purchased late yesterday using the support calculations. I did not want to hold over the weekend. I had hoped for a quick 10 to 25% profit in one day and I kept my investment low due to the risk. Needless to say I was surprised by the jobs report. With the big open, I recalculated the DOW and OEX pivot point around 9:50am. This turned out to be my savior as the Thursday night alert numbers were obsolete and did not reflect the true S2 as the market had reversed big time around 9:55 or so. I sold when it hit the S2 around 435 and made a profit of 9%. Not quite my target, but better than a 40% loss.
The market was perfectly trade game for us Friday, with the June 445 call easily bought and sold for $2.00 per contract profits :) Many day traders traded the range with the June 630P by doing exactly what our CPA, KH, wrote above.
These OEX trades bought on the new calculation, and sold on it, for a quick $1.50 on the June 630P. We hold a hedge put, and have two new trades for the day, and new Dow projections.
Will Rogers: " I am not nearly so concerned about the return on my capital and I am the return of my capital"
No comments:
Post a Comment