In his latest letter, Raymond James strategist Jeff Saut laughs at the bears still calling this a “Sucker’s Rally”
To us it is interesting that despite the monstrous rally in stocks, accompanied by extremely strong advance/decline statistics (Art showed a great breadth chart of this at the conference, which is attached), the negative nabobs continue to call this a bear market “sucker’s rally!” While it’s true that markets can do anything, the real “suckers” have been the bears who didn’t employ adaptive asset allocation and consequently have “sat” out the seven-month rally. Clearly, we disagree with the bears’ assessment, having maintained the view that this is a new bull market since April. Moreover, participants got the Dow Theory confirmation of that “bull market” strategy either in July, or August, depending on which levels you used for the Dow and the Transports. Whether the current rally turns out to be a tactical bull market within the longer-term confines of a trading range market, or the first “leg” of a new secular bull market, remains to be seen.
But, as we told our friend and founder of the “must have” minyanville.com website, “does it really matter?!” Indeed, as the title of Ned Davis’ legendary book reads, “Being Right or Making Money?” Obviously, we’ll opt for “making money.” To that point, we have argued that with credit spreads (Ted spread, OIS to Libor, etc.) back to pre-Lehman levels, there is no reason why the equity market can’t “fill” the downside vacuum visible in the charts created by the Lehman bankruptcy. In the S&P 500’s (SPX/1087.68) case this implies at least a 1200 upside target. Tobe sure, there will eventually be a healthy correction, yet there is little question the primary trend is “up.”