Don't Trust the Rally into Month's End

On Tuesday, investors were trying to make sense of the market action after stocks advanced for a third straight day in a volatile session.

The action was particularly intriguing because stocks traded as much as 1% lower at the open after a terrible consumer confidence reading rattled investors.

However, stocks not only pared losses, they clawed into positive territory and by the close, the market had turned itself around to the tune of a 4% gain over a week.

Some chart watchers says the S&P's second consecutive close above 1,200 is a sign bulls may be regaining their footing, however skeptics argue that volume has been light with about 7.2 billion shares traded on the NYSE, Amex, and Nasdaq on Tuesday. That's well below last year's daily average of 8.47 billion.

What should you make of it?

Steve Grasso believes the current rally is largely being driven by pension funds re-balancing. “$135 billion is coming out of fixed income and going into equities,” he says. “But now I think the rally is overdone,” he adds. However, he wouldn’t play it short. “I would not get in the way of it. Just stay away."

Guy Adami is in the same camp as Grasso. “If we do rally into the end of the week, I’m a seller of the rally. I'd take profits,” he says.

Tim Seymour is also skeptical. He thinks the light volumes are a sign that big investors are largely taking a 'wait and see' approach.

On a related note, Mark Zandi of Moody’s Analytics thinks the economy is at a critical juncture. He believes the US is dangerously close to a recession.

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