So, now that we just made 40 S&P points, is it still up,
up, and away from here? The market could definitely run away higher
from here. That's a clear risk for equity fund managers who don't
want to be caught under-invested at this time.
And I love this kind of tension too where, after months of bearish
sentiment, all it takes is a good news catalyst that removes doubt
about something (like European systemic banking contagion), and you
can move another 30 points higher before the open (like the S&P
did last week on Thursday October 27).
By the way, that kind of strong "Good morning and how the heck are
ya!" where the futures are 1-2% higher before the opening bell
rings is fund managers scrambling to get exposure. They use the
S&P futures because it's the fastest, most liquid vehicle they
But not all are this nimble. And lots of that futures buying is by
hedge funds putting the screws to the portfolio guys. Yes, markets
fall faster than they rally, since panic is often stronger than
greed. Yet, a surging market is also a wonder to behold, especially
if you are already long and watching other investors chase your
That's why you want to have some core long positions so that you
are invested in this potential, not chasing it. And then you wait
for other fear-driven dips to buy.
Volatility and Valuations
Kevin Cook is a Senior Stock Strategist with
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.