Sell in May and Go Away? Jeff Saut Says Don't Wait 'Til Then ~ market folly

Monday, April 19, 2010

Sell in May and Go Away? Jeff Saut Says Don't Wait 'Til Then

Raymond James' Chief Investment Strategist Jeff Saut is out with his latest weekly missive with the clever title, 'Don't Wait for May to Go Away.' This of course is a play on the old Wall Street adage: 'sell in May and go away.' Historically, the period between May and November has underperformed while the period between November and April has solid performance. His latest commentary comes after last week's piece where examined how inflation begins.

Saut essentially is saying take some profits here as he is increasingly cautious in his latest investment strategy publication. He cites numerous factors for this cautionary stance, including contrarian signals such as:

- Sentiment gauges that are as bullish as they were in 1987
- A CBOE equity put/call ratio of 0.32 (very heavy call volume)
- Stocks are the most overbought since the rally began in March 2009

Simply put, Saut thinks that the markets are at a near-term top but he is still long-term bullish. As such, they are recommending hedges for downside protection. You can view his entire market commentary embedded below:

You can directly download a .pdf here.

As we've mentioned in a previous post examining key technical levels in the markets, it never hurts to lock in some profits and raise cash levels as things become extended and more uncertain. While shorting is not necessarily advisable until the market starts to show more signs of weakness, reducing long exposure and employing some cheap hedges is not a bad idea at all and generally we'd agree with his thoughts here. After all, puts are quite cheap right now as Saut referenced. For more from Jeff Saut, check out his previous commentary entitled how inflation begins. Overall though, the market strategist keeps with his short-term cautious, long-term bullish stance.

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