Art Cashin Warns Of Short Squeeze

CNBC's Bob Pisani and UBS' Art Cashin met to discuss the latest market conditions, and looked into some signs of a short squeeze.

Cashin noted that the recent strength in the U.S. Dollar, which usually puts some pressure on commodities, has not done so this time. The market has seen iron ore, copper and other commodities moving up.

What Cashin finds stunning, after decades working in the financial field, is that “you still see signs of short squeezes.” For instance, last Friday, the most shorted stocks were the ones that registered the largest gains.

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“Ordinarily, you see that kind of attention in the first day or two of a rally,” Cashin explained. But, you usually don't see this lasting for four or five days, he added. "That's one of the things of a short squeeze: if they get panicky enough, they cover."

This indicates that "the shorts were extraordinarily heavy," Cashin explained, "and that they are unable to cover them; they back off because you’re seeing 10 percent moves within a day in some stocks."

Seadrill Ltd SDRL, for instance, has almost tripled in price since the beginning of March, and continues to surge. And, Cashin presumes, a lot of that is short covered.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.