Strategist Saut Points to Transports: Latest Market Commentary ~ market folly

Monday, May 2, 2011

Strategist Saut Points to Transports: Latest Market Commentary

Market strategist Jeff Saut's latest weekly commentary reiterates his message that "you can get cautious from time to time, but don't get bearish." He thinks this is a buy-the-dips market and also points to some recent signals.

Focus on Transports

He writes, "The Dow Jones Industrial average recorded yet another 'buy signal' as the Transportation Average surged to new all-time 'highs' confirmed by the industrial's rally to a new reaction high. It was the third Dow Theory 'buy signal' of the past 10 months and reconfirms that the direction of the senior index is up."

Transports are often seen as a gauge of economic activity and we noticed this last week as well, posting on Twitter that "if transports are (a) leading economic indicator, rails pointing to good times UNP NSC KSU." We highlighted that railroad stocks are surging higher and have noted increased hedge fund interest in the past few quarters. Be sure to follow MarketFolly on Twitter as we share daily market thoughts there.

So while the market is holding up nicely and the transports are signaling a continued economic recovery, Saut says to keep a cautious eye out, but don't turn bearish: "we expect on/off strength into June followed by the first potential downside vulnerability as participants worry about the end of Quantitative Easing."

After all, many investors have focused on not "fighting the Fed" and prominent hedge fund manager David Tepper famously said to buy stocks back in September simply because the Fed was printing money. The end of that printing press, though, could certainly alter the portfolio construction of many managers.

Embedded below is Saut's latest investment strategy:

You can download a .pdf copy here.

Be sure to check out Saut's commentary last time around where he said to accumulate stocks with favorable risk/reward.

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