Be Cautious
In view of the very positive record of the market on the first day of the new month, you have to wonder how much of the action today was program-driven rather than real buying. Of course, some will say it's all program-driven these days, so it doesn't really matter. It's important to recognize that the machines don't have a memory from day-to-day, and that leads to a higher risk of fast reversals, as well as prolonged lopsided movement.
It looks like the algorithms were very aware of the positive inclination of the market on May 1, so they were programmed to buy once the ISM number hit. It was a strong number and that caused us to jump very sharply, very quickly. But I suspect that even a weak number would have been ignored today. The machines shut down early for the day and we ended up with a very poor close. The weak afternoon action is not indicative of sustained momentum buying....266 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
There’s no substitute for a trading floor to get great ideas, so Jim Cramer created a better one at Real Money and blogs there exclusively. We then added legendary hedge fund manager, Doug Kass, with his exclusive Daily Diary and best investing ideas. Staffed with more than 4 dozen investing pros, money managers, journalists and analysts, Real Money Pro gives you a flood of opinions, analysis and actionable trading advice found nowhere else, and allows you to interact directly with each expert.
Already a Subscriber? Please login.
