One Friday doesn’t ruin the bullish picture

by Michael Tarsala, CMT

One particularly crummy Friday does not ruin the bullish picture for stocks, says Jeffrey Saut, equity strategist at Raymond James.

I am paraphrasing, of course. But prior to Friday’s dismal jobs report, Saut had been of the mind that a two-month trading range since May 5 had the potential to resolve to the upside. And why not? Through all of the worries about Europe’s debt crisis, the possibility of a further Chinese slowdown, and concerns about the U.S. earnings picture, the stock picture improved greatly from the June lows. And investor sentiment remained low – a potential key to building a rally.


Then came that lousy Friday and a break back below the 1360 mark, the worst by far of three straight days of selling. Saut had told clients previously that a sustained rise above 1360 would be a signal to aggressively add stocks.

No dice. At least not yet – although Saut says it could still happen.

In his latest missive, he notes the following:

  • None of the major macro models he uses to determine market direction have turned negative
  • Any pullback could be shallow – to the 1335 to 1345 level on the S&P 500
  • The best strategy may be to continue buying stocks that are not correlated with the markets
  • Stocks with high dividend yields also may be worth considering

To his latter point, Covestor happens to have five different investment models focused on dividend yields.

We always welcome you to talk to us so we can get to know you better, and perhaps we can find an investment model that is right for you.