Jeff Saut Says Market in Bottoming Process ~ market folly

Wednesday, May 19, 2010

Jeff Saut Says Market in Bottoming Process

Jeff Saut, Chief Investment Strategist over at Raymond James, thinks the market is in the middle of a bottoming process. In his latest market commentary, he mentions that the market's 'convalescing period' could take anywhere from two to eight weeks. He is looking to accumulate stocks during this period and has advised to ready your 'buy list' of preferred names you want to own. In the weeks leading up to the pullback, Saut had advocated caution and raised cash levels. The market initially declined recently from the flash crash and then rallied sharply back but did not breach the 50 day moving average. As such, he thinks a re-test of the recent low is in order and he anticipates it will hold.

In terms of what specifically to invest in, Saut had a few recommendations. He in particular likes Brazil as the country has plenty of fresh water, agricultural commodities and energy. While he has been somewhat cautious on emerging markets in the near-term, he is quite bullish for the long-term. For fund investors, he mentions the new Dreyfus Brazil Equity Fund (DBZAX) and for individual stocks he recommends CPFL Energia (CPL). Regarding non-Brazilian recommendations, Saut again mentions 7% yielding Enterprise Partners (EPD) which is on Raymond James' focus list. He mentioned this last time around when he advised to selectively upgrade the stocks in your portfolio.

Jeff Saut ends his commentary by saying, "Indeed, market historians should recall that after a selling climax what typically happens is a one-to-three-session throwback rally followed by a downside retest attempt of those 'lows.' Sometimes the 'lows' are marginally broken, but most of the time they are not. I continue to invest accordingly."

Embedded below is Jeff Saut's latest market commentary:

You can download a .pdf here.

Saut was right in his call to be cautious and raise cash a few weeks ago. We'll have to see if he's correct again if the market does start to bottom here and trade higher. However, many market pundits are calling for the market to go decisively lower, so no we wait. For more from Jeff Saut, you can see his past investment strategy here.

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