Saut: Fear, Hope And Greed

Jeff Saut, the respectful strategist at Raymond James has posted his weekly missive, see the latest version here. Last time on this blog Jeff suggested this.
His call for this week (but read the full story) in very short:

On May 18, 2009 I wrote, “So far any downside correction, since the early March lows, has been contained to between 5% and 6.4%. That suggests any correction of more than 6.4% could imply more of a correction than any we have seen since the demonic S&P 500 low of 666. Measuring from the May 8th closing high of 929.23, a greater than 6.4% price decline yields a ‘failsafe point’ of slightly below 870 on the SPX. If that level is violated, it would suggest a decline to at least 830 (the 50-DMA is near 832) and maybe more.” As of yet neither the 6.4% correction level from the “highs” nor the 870 failsafe level has been violated. Today could provide another downside “test” since the mutual funds are now 90 days from the March “lows” and are able to get some kind of tax break on the sale of long positions bought more than three months ago. If, however, the selling doesn’t gain much traction we could see another rally into quarter’s end. Clearly, Friday’s upside breakout suggests that possibility. Yet, we still can’t decide if Friday was a breakout or a fake out that just widens the now four-week sideways consolidation. The next few sessions should resolve the divergences.

Consider as a probability!