Jeff Saut & Scott Brown: Characteristics of Market Breakouts From Big Bases

Raymond James' market strategist Jeff Saut and chief economist Scott Brown have just released their 'Gleanings' report highlighting various charts that pull together economics, fundamentals, and quantitative analysis regarding the market.

The biggest point they've highlighted is that the market has a history of making 'big bases' and then ramping higher.  Saut points out that there have been four big bases that have exceeded 12 years since 1900:

- 1906 to 1924, 18 years
- 1929 to 1955, 26 years
- 1966 to 1982, 16 years
- 2000 to 2013, 13 years

Saut notes that, "Investor behavior reflects an underlying distrust or disinterest and is characterized by underinvestment in equities.  This results in a rebound that is relentless, providing little opportunity to buy on pullbacks."

With these long built up bases and the breakouts that often follow them, Saut highlights some common fundamental characteristcis:

- Rebound from high unemployment
- High government interest payments on debt
- Low investor allocation to equities
- Extremely high/low interest rates (alternates)


Embedded below is the Raymond James slideshow presentation, 'Gleanings: June 2013':




You can download a .pdf copy here.

For more from these gentlemen, head to Jeff Saut on the odds of a new secular bull market.

Jeff Saut, Scott Brown & Art Huprich on Current Economic and Technical Takeaways

Market Strategist Jeff Saut, along with technician Art Huprich and economist Scott Brown have put out an interesting compilation of data/charts entitled 'Gleanings.'  In it, they incorporate economics, fundamentals, technical analysis, and quantitative analysis. 

Overall, they see equity optimism due to the "open-ended central bank's 'put option,' QE3."  Here are some of the macro and technical highlights from what they're seeing:


Key Economic Takeaways

- Fed is targeting mortgage rates and 30-year rates recently hit a generational low (3.38%)

- "Good time to buy a house" helps housing as prices are improving

- Financials have traded higher & they think that continues due to low valuation, balance sheet clean-up, and housing's stabilization

- Inflation-adjusted consumer spending continues to trend at moderate pace

- Aging fleet of autos have supported improving trend in auto sales

- Home sales & construction activity are up double digit percentages since last year

- PCE Price Index is trending below Fed's 2% target (other core inflation measures have been drifting lower as well)

- Economic wildcards: gasoline and the election

- Economic risks: Europe, fiscal cliff, and debt ceiling.  (We recently highlighted Kyle Bass' thoughts on Europe and also presented Ray Dalio's interview on macro topics).


What The Technicals Say

- "Bernanke put" backed by Quantitative Easing

- Favorable 'seasonal' market & election cycle historical trends should backstop any declines into year-end

- Charts suggest having exposure to financials via selective exposure.  (We've noted how many hedge funds have bet on AIG this year).

- Charts are bullish for Homebuilders ETF (XHB) and Home Construction ETF (ITB) over the long-term, though a mid-term pullback would be healthy

- Bullishly configured price trend in S&P Consumer Discretionary sector


Embedded below is their presentation 'Gleanings' full of charts:




For more from Jeff Saut,this week we posted up his commentary examining how many investors are underperforming this year.