Uber-Bull Jeff Saut: Get Ready For Stocks To Hit An "Air Pocket" In January

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Raymond James strategist Jeff Saut has been mostly right on the rally all year long, and he still sees more upside, but in his weekly note, he’s warning of trouble come January:

The call for this week: When I left the country last Tuesday the S&P 500 (SPX/1243.91) was trading at 1242 and my “call” was, “I think we are making a very short-term trading top here, but I don’t think any selling will gain much downside traction. All I think happens is the equity markets stall, and rest, while they rebuild their internal energy for another rally into the new year.” Well, I’m back in the country and the SPX is roughly 2 points higher than when I left and I still think we are setting the stage for another rally into the new year. That said, there are signs that the current rally is long of tooth, suggesting the potential for a January “air pocket.” Furthermore, there is precedent for that. In 1981 the SPX suffered a 5% downside “air pocket.” Again in 1990 there was a 7% “hit.” In fact, January 2010 saw a 4% hiccup. Accordingly, while I still believe the upside should be favoured into year-end, I am starting to consider some downside hedge “bets” to reduce the risk in portfolios

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