Art Cashin, UBS Financial Services director of floor operations, offered CNBC his take on what traders are watching Thursday — and his predictions for the stock market in coming days.
After bouts of strong trading yesterday (Wednesday), what happened in the final hour to lower the market?
"As I said to you a couple of days ago, I think there's nervousness back in the market. The next several days will tell us whether it's going to be a significant pullback or just a cleanup of the overbought condition."
Cashin's own take? "I'm leaning toward a significant pullback."
As to the financial stocks, Cashin warned that the stress test could be a "ticking time bomb":
"If it's a real 'stress test,' we could be back where we were in the pre-Lehman days," he said, with big banks dichotomized into survivors and those which look healthy — but suddenly collapse.
Bank stocks [XLF 10.88 0.45 (+4.31%) ] posted impressive gains Wednesday despite reports that “at least six of the 19 largest U.S. banks require additional capital, according to preliminary results of government stress tests.”
According to Bloomberg, “while some of the lenders may need extra cash injections from the government, most of the capital is likely to come from converting preferred shares to common equity.” ie major dilution of PPS
Wednesday's gains sent the S&P to its highest levels in 3-1/2 months while the Dow [.DJIA 8185.73 --- UNCH (0) ] scored its highest close since February.
Strategy Session with the Fast Money Traders
I think it’s time to take some profits, counsels Guy Adami.
We didn’t really break out on the S&P, counsels Jeff Macke. We’re still in a range and I too, would take some profits.
At this level on the S&P I'd be careful, adds Pete Najarian. However, even if we do pull back, I'm expecting higher lows on the S&P.