Be wary of market's rally: Traders

U.S. stocks rallied Friday after a wild week of swings, but several traders cautioned against a v-shape recovery and warned volatility could continue.

The Dow Jones industrial average was on track to have its best day after a six-day losing streak since 2008. The Russell 2000, the primary index for small-cap stocks, had its best week in 14 years when compared with the S&P 500.

By midday, however, the Russell turned negative.

"I don't want to see the S&P up 1.5 percent and the Russell go negative. You also don't want to see commodities do a collapse. These are not positive signs," Ritholtz Wealth Management CEO Josh Brown said in an interview with CNBC's "Power Lunch."

"I think it is better to not attempt this v-shape recovery, rally right back up to the major moving average and then fail. That would be crushing to confidence."

Traders work on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters
Traders work on the floor of the New York Stock Exchange.

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Instead, stocks need to rest and volatility needs to calm down so "we can sort out what got hit hard and what didn't," he added.

Optionmonster co-founder and CNBC contributor Jon Najarian agreed.

"Rather than a v-shape bottom, I would rather see some consolidation. But people are seeing bargains and they're buying today."

O'Neil Securities' Kenny Polcari, also a CNBC contributor, believes Friday's rally is a knee-jerk reaction.

"This bounce back may make everyone feel good but yet what you really want to see is the actually market back off once again, test those lows and churn slowly and not this rapid advance ahead," he said.

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Katie Nixon, chief investment officer of Northern Trust Wealth, is advising clients to expect volatility and stay the course.

She likes high-yield bonds and U.S. stocks.

"We're very positive on U.S. equities. We understand that the valuations certainly are average to slightly above average. But so are the fundamentals right now," she said.

Earnings are very strong, Nixon added, and she believes the Federal Reserve will continue to be "very accommodative well past when most investors think the Fed is going to raise rates.""

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On the other hand, Wasif Latif, head of global multi-media assets at USAA Investments, believes U.S. stocks are on the rich side. He's investing outside the country.

"Every time QE has ended since 2009 we've seen stock volatility telling us that the economic activity underneath all of this is still relatively week," Latif said.

He called emerging markets and Europe are "very attractive" on a relative value basis.