The following is an excerpt from the commentary of Jeffrey Saut, Chief Investment Strategist and Managing Director of Equity Research at Raymond James & Associates, for Tuesday January 17. To read the full commentary, click here
The call for today: The turtle makes no progress until it sticks its neck out; I have been sticking my neck out since Thanksgiving, believing the Santa rally was beginning.
I stuck with that strategy until the first day of trading this year, which felt like a short-term emotional trading peak. A short-term price peak occurred on 1/10/12 at 1296.46 basis the SPX, as chronicled in these missives.
The only question in my mind was whether we were going to get a pullback into the 1230 - 1240 support zone, or if we would experience a sideways correction as the overbought condition was worked off and the market's internal energy was rebuilt.
So far it's been a sideways correction, leaving the NYSE McClellan Oscillator not overbought, but not oversold either. In fact, it is hovering around the neutral line. Meanwhile, the stock market's internal energy is almost fully recharged.
And this morning we are greeted with better than expected Chinese GDP growth (+8.9% vs. +8.7%E), a worldwide interest rate easing cycle, the largest jump in German investor confidence ever, a decent Spanish bond auction, and hints of another round of quantitative easing.
The result has the pre-opening S&P 500 futures up double digits, precious metals sharply higher, crude oil back above $100/bbl., and a lower U.S. dollar.
Accordingly, while I would have liked to see more of a pullback to a minimum of 1250 - 1260, I'll say it again - I think it is a mistake to become too bearish . . .
