First Trading Day of Month: No Magic Bullet

Well, so much for the idea that the first trading day of the month would be an up day: We broke a 7-month record today.

What happened? Fundamentals happened.

$100 oil has become a serious psychological barrier for stocks. Oil closed just shy of $100 today, the highest close since September 2008. The S&P 500 and oil moved in a near-perfect inverse correlation today: as oil moved up, the S&P moved down; when oil closed on its lows at 2:30pm ET, stocks simply floundered at their lows for the rest of the trading sessiion.

The Dow Transportation Index, down 2.5 percent, declined twice as much as the Dow Industrials. That is unusual.

Many traders have been positioned long and were particularly keen to play into the fabled first trading day of the month (see the rise in yesterday's market in the second half of the day). With oil advancing relentlessly midday, many decided to get out early and even short the market. The ProShares UltraShort S&P 500 ETF , for example, had volume 50 percent higher than normal.

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