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Art Cashin: Why Stocks Will Rally This Week

Job cuts by America's private employers were worse than expected in June — but planned layoffs fell for a fifth consecutive month, says a report from ADP Employer Services. What's it mean for stocks?

Art Cashin, director of floor operations at UBS Financial Services, offered CNBC his market insights.

After the ADP report was released, futures dipped — then recovered. Cashin explained the resurgence as a matter of precedent:

"There's usually a slight [upside] prejudice in the first three trading days of the month. ...There's new money for the new month: pre-funding pensions, things like that."

Plus, "the two days before a 3-day weekend have a historical prejudice to the upside," he added. "Not overly strong — about 60 percent. The shorts get nervous and tend to cover."

Cashin is "concerned" about employment data, pointing to low capacity utilization:

"As long as that stays down there, we're going to have a tough time."

But Cashin said the upside trending faces one specific threat:

"The enemy of all this — even the historic perspective — is that trading is so light. Buying and selling power is very, very small. Historic precedent may go out the window."

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CNBC's Companies in the News:

Citigroup

Ford Motor

Wal-Mart Stores

General Motors

Morgan Stanley

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Disclosures:

Disclosure information was not available for Cashin or his company.

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