Jeff Saut of Raymond James says his indicators are pointing to historical buying points:

“the recent downside dive from May 1st’s 1415 level into last Friday’s close of 1295.22 has caused many of my indicators to register readings not seen in a long time. For example, the McClellan Oscillator is now at oversold readings not seen since the recent April 10th trading bottom (see chart on page 3). Then there is the CBOE Equity Put/Call Ratio, which is flashing a “buy signal” that has proven profitable at every downside inflection point since 1994; or, as the astute folks at Bespoke write:

“Following today’s 0.44% decline (5/16/12) in the S&P 500, the 10-day Advance/Decline line for the S&P 500 has now dropped down to –1,930. This is an extreme oversold reading based on historical standards. For those unfamiliar with the indicator, the 10-Day A/D line is simply a rolling 10-day total of the daily net number (of similar readings) shows that equities have historically rebounded after hitting such extreme oversold levels. Over the next week, the S&P 500 averages a gain of 1.21% with positive returns two-thirds of the time. Over the next month, the S&P 500 averages a gain of 5.58% with positive returns 83% of the time. Going out three months, the S&P 500 averages a gain of 7.68%, and over the next six months the index averages a gain of 13.35%.”

Adding to the litany of downside inflection-point indicators is the AAII (American Association of Individual Investors) survey that recorded its lowest bullish reading (23.6% bulls) since August 2010. Moreover, my parade of short/intermediate-term indicators shows a composite reading that is at historic levels. To wit, there have only been only four other times when my indicators have combined to show such negative inclinations. More than seventy percent of the time, given such readings, the major market averages have been higher a week later, while 92% of the time they have been higher a month later. “

Soource: Raymond James


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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • Larry S

    Saut said: “More than seventy percent of the time, given such readings, the major market averages have been higher a week later, while 92% of the time they have been higher a month later. “
    Wow. I wonder how big the statistical sample is. I guess the central banks have enough firepower to support a resumption of their interrupted rally since last October? I’m gonna hold equities here, wait and see before buying.

  • Lance

    “…the McClellan Oscillator is now at oversold readings not seen since the recent April 10th trading bottom…”

    Gosh, back in the Pleistocene.

    Even the nomenclature is sell-side. “Negative” becomes “oversold” of course, with all that that word might imply.

    Of course buying after SPX -100 is always better than before … except when it isn’t. :)

  • Tom Reilly

    Unless Europe (especially the DAX) rallies too, Mr. Saut’s technical analysis is useless.

    The correlation between the DAX and SP500 can not be ignored just like in 2008.

  • VII

    Saut, is great.
    If the bulls can get to work and recover some levels, hold them, get buyers back fearing their missing a rally, get QE discussed and locked.. Then the bulls will frustrate the bears. But that is a lot of conjecture.
    I’ve seen the bulls pull many comebacks before. Let’s see..
    I need to see strong follow through today to build off of yesterday. Repeat that and print higher quickly

  • El Viejo
  • esb

    Well there you have it.

    Lance Roberts v. Jeff Saut.

    One will be right. One will be wrong.

    Who(m) do you think will be which?

    (At least it will give us the oportunity to shorten our read list by one personage.)

  • BJM


  • ES

    Well, so far he is right. He actually ends up right quite a lot of times with his bullish calls, but they are usually a week duration at most. It is like trying to follow Mark Faber, for example. He is right for 1 day. By the time you get in based on the call everybody else already got out.
    Which always makes me wonder if the strategists like Saut publish their reserach privately a couple days in advance, all the big fish gets in on command. Then they all get out once the report is public.

  • Larry

    Yes, that is the question: will Jeff Saut be right for longer than a few days? SPX rally seems to be stalling around 1325 level. Oil and copper continue to fall, that seems to indicate a slowing global economy, and slowing commodity demand from China and the rest of Asia. USD continues to strengthen vs Euro, and how many sustained rallies have we had with a weak Euro?

  • AWF

    The 10 day A/D line is a “Short-Term” trading technique–days
    Used to measure Overbought/Oversold

    On an Intermediate Term basis–Wks and Months we are on Sell
    To issue a new Buy signal the S&P500 would have to close above 1369 on a Wkly basis

    Anything else is just “Saut” pump and dumping.

  • VII

    Their both wrong.
    The market is right.
    The SPX can go to 1440-1510 right here and make Lance look stupid. The SPX could go to sub 1200 real fast and make Saut look stupid.
    If you think you have to choose sides your not doing your job. Your job is to make money. The market is in a bad position. Recognize that..figure out where you need to reduce risk and what would ratify the move lower in advance. If resistance get’s pierced in the context of other historical situations or with QE coming recognize the potential of the move and take advantage of that.
    Dont’ choose either one of the sides. Understand both. Lance is right’s dangerous. And Suat is right..sentiment is washed.
    So what- The SPX is right. Even if it’s QE induced…or whatever. It doesn’t matter how it gets to where it gets. Theres no point in debating the Y’s of things. Leave that up to Krugman on Saturday morning Bubble vision

  • VII


    What do you do for a living?

  • VII

    AWF- A+… That my friends is how it’s done.
    Q: Given the current weekly close where were at…How the hell is this thing not on the canvas? That is one hell of a chin!