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Analyst Watch: Markets Are Up ... For Now

Published: Tuesday, 3 Aug 2010 | 7:57 AM ET

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U.S. stock index futures pointed to a lower open on Wall Street on Tuesday following the previous session's strong gains.

The dollar fell to a 3-month low against the euro on Tuesday, as the single currency gained support from solid euro zone data and corporate earnings, while the greenback fell on the perception that the U.S. growth outlook is deteriorating, forcing the Federal Reserve to keep interest rates low.

Here's what guests on today's Squawk on the Street are watching before the opening bell:

Since July 1 The Dow [.DJIA Loading... () ], Nasdaq [.NDQ Loading... () ], S&P 500 [.SPX Loading... () ], Russell 3000 [RUA Loading... () ], Wilshire [WFVK Loading... () ] and oil are all up 9 percent but the transports are leading the way up 12 percent. Is this a sign that cash is back in the markets?

Paul Schatz, Heritage Capital, LLC President says that while it's an interesting statistic, it doesn't mean the cash that has been sitting on the sidelines for months is starting to chase returns.

"Just like when stocks collapsed in May and June, the whole world wasn’t panic selling," he says. "Volume has been anemic for some time and that’s one mediocre indicator to prove your point. Stocks can rise from a surge in buying interest or a lack of sellers or a combination."

Schatz says he thinks cash on the sidelines may be the single worst indicator in history.

"There is very little correlation to cash on the sidelines and investment returns," he explains. "The vast, vast majority of cash on the sidelines isn’t meant for equities no matter what. And there has been records cash levels for at least eight to 10 years."

As such, he's short-term bullish on the markets, preferring to “rent” rather than “own” positions. "The current rally should top out somewhere between the June and April high over the coming month (with a slight chance of a new 2010 high being the perfect selling opportunity) or so where I will become much more defensive. The end of the move could be explosive so just because I think the end is coming, doesn’t mean I wouldn’t enjoy the ride. It be may the last chance to make good money this year."

So where is he putting his money?

Heritage Capital's largest positions are in:

REITS [IYR Loading... () ]

long-term treasuries [TLT Loading... () ]

high yield bonds [JNK Loading... () ]

and commodities [DBC Loading... () ]

See more of what these and other analysts and money managers have to say, and get the latest financial news. Watch Squawk on the Street every weekday morning starting at 9 a.m. ET.

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