Despite a worsening situation in Iraq and unconfirmed reports of Iranian troops joining the fight, the U.S. stock market drifted upward Friday as "overbought" conditions subsided in the Dow and S&P, veteran trader Art Cashin told CNBC.
"What frightened me the last two days is not frightening me any more," said Cashin, UBS' director of floor operations at the NYSE. "I don't hear that noise anymore. People are nibbling around. Some of the buy-the-dip crowd is coming back."
Cashin added: "For now, the markets want to tiptoe into the weekend."
Speaking minutes after President Barack Obama addressed the situation in Iraq, Cashin said markets seemed unfazed by the Sunni uprising there because of rumors of Iranian intervention. Trading desks are going with unconfirmed reports that Iranian troops are helping the Iraqi government defend Baghdad, he said.
"Even though that's not good diplomatically for the U.S. necessarily—but it means a stalemate," Cashin said. "It means that the insurgents are not going to sweep through Baghdad."
Cashin added that the S&P faces resistance at the 1,938 to 1,941 level.
—By CNBC's Jeff Morganteen