The latest strategy note from Raymond James’ Jeff Saut…
The call for this week: Well, I have been laid up with a hyper-extended Achilles tendon since last Thursday and consequently unable to walk. The stock market, however, has been doing some “walking” of its own as last week the S&P 500 (SPX/1216.01) sprung from Monday’s intraday low (1136.07) into Friday’s intraday high (1220.06) for a 7.4% intraday Weekly Wow with all five sessions in the green. In last Monday’s missive I had suggested the previous week’s pullback could constitute a retest of the all important 1100 – 1120 support level for the SPX. The Spoo’s surge allowed the SPX to surpass two of my bullish trigger points at 1172 and 1206 and thus leaves it in position to challenge the recent reaction high ~1230, which is also slightly above its 50-day moving average (DMA) of 1228.54. Bettering those levels, on a closing basis, would bring into view the 1260 to 1280 level, which is where the SPX’s 200-DMA resides at 1283.58. Week-over-week the INDU closed better by 4.70%, but the economically-sensitive D-J Transportation Average (TRAN/4664.60) gained 6.77%, reinforcing my “no recession” belief. Also bolstering that view was a 7.05% weekly win for the Information Technology sector, which is good for our analyst’s recommendation on Tangoe (TNGO/$13.47/Strong Buy), as well as a 6.92% lift in the Consumer Discretionary space, which is good for our analyst’s recommendation on Darden (DRI/$45.61/ Outperform). And don’t look now, but the NASDAQ posted its best weekly advance in two years! Nevertheless, it would not surprise me to see more pullback attempts, consistent with all of the aforementioned bottoming sequences. And, this morning the preopening futures are indeed lower on renewed Greek default worries, a class warfare tax proposal by the Obama administration, an Angela Merkel rebuff, and the list goes on. Still, as stated since August 10th, I remain constructive provided the 1100 level on the SPX is not decisively violated to the downside. In such a “whippy,” hopefully bottoming, environment it pays to be flexible, so I leave you with yet another Bruce Lee quote. To wit, “If you put water into a cup, it becomes the cup. You put water into a bottle; it becomes the bottle. You put it into a teapot; it becomes the teapot. Water can flow, or it can crash. Be water, my friend . . .“
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