Thursday, January 6, 2011

Andy Xie, Raymond James' Jeff Saut Cautious On Market,

Two sharp analysts, similar outlook.
From Market Folly:

It's been a long time since we last checked in on market strategist Jeff Saut's commentary and figured the new year would be a perfect time to do so. In short, he is currently cautious on the stock market, wary of a repeat of January 2009. So, why is he cautious?

Saut writes, "in the short-term, the odds are not tipped decidedly in investors' favor, at least not by the metrics I use. Indeed, the Volatility Index (VIX/17.75) is down to 'complacency levels' last seen in April right before the 17% correction. Ditto, investors intelligence data shows advisory sentiment approaching the bullish extremes of October 2007."

Simply put, he feels that investors have become complacent and bullish sentiment has skied high, something he is using as a contrarian signal. But while the market strategist feels that stocks are due for a pullback, he is a buyer of those dips.

One thing we've noticed is that Saut has often been correct in his past calls, so kudos to him for utilizing timing signals such as volatility, sentiment levels, and overbought/oversold metrics. At the same time, he is often early with his calls and he freely admits this in his latest market commentary. After all, momentum and bullish sentiment can last much longer than many anticipate. It's a tough train to jump in front of.....MORE, including complete RJ Investment Strategy letter.
And from Caixin Online via MarketWatch: 
Fortunes due and fitting
Commentary: Risk-reward allocation this year may mirror 2010
This year may start out looking like the last, dipping down later and then resurfacing with hope. Like last year, 2011 will be a year of transitions.  
What’s kept the global economy stable — fiscal and monetary stimulus in the West and asset bubbles in the developing world — may also act as a catalyst for the next crisis. The timing for that crisis will likely occur in late 2012. 

Last year began with an overwhelmingly bullish sentiment. The consensus was that the “cycle” had turned, and that the upward trend would last for years.

But by the middle of the year, the evidence came to suggest that the economic bounce didn’t expand beyond the stimulus. The global economy didn’t behave like a stalled car which would simply accelerate after a push.

The double-dip fear sent markets tumbling. The selling stopped when the Fed began to talk about its second round of quantitative easing measures, which sent the stock markets soaring.

Adding to the optimism was the Obama tax-cut package, in which the upward momentum was carried through to the year’s end.

The news on sovereign-credit crises dominated the news flow out of Europe. The euro (EURUSD 1.3016, -0.0114, -0.8671%went on a roller-coaster ride on the news, ending at a good level. Tracing its trajectory will help us understand the magnitude of the euro zone’s problems relative to the U.S.

In the end, the euro zone stacks up well against the U.S. dollar. The state governments in the U.S. are struggling with fiscal problems as big as the fringe euro-zone countries. The U.S.’s debt level is much higher and rising faster....MORE
Dear Santa, I would like an early Christmas present.
An exact duplicate of last year's second-week-of-January crashette, covering Jan. options expiration would be very nice.
Thank you.

Here's the DJIA chart for last January, from BigCharts: