It’s August and most investors are on holiday. The trading desks and hedge funds are in charge and they can push it whichever way they want.
They caught many investors leaning the wrong way on Thursday morning on news of terrorist airline plots. Pre-market futures were down as much as 1% prior to the opening and put buying was heavy. Da Boyz knew this and squeezed them out of their positions. After pocketing that money and patting themselves on the back, it was back to business as usual Friday:
The bottom line is with a peace accord in the Middle East (if it holds) and BP’s weekend announcement that the Alaskan pipeline shutdown won’t be as bad as feared, markets could rally this week. There will be lots of data to move markets one way or another (industrial production, housing starts, PPI, CPI and so forth) and this week is options expiration which will add unpredictable volatility.
While earnings news has been good overall, an economic slowdown will challenge future earnings estimates and results. With volume still summertime light large cash positions are still favored in my opinion.