market folly

Market strategist Jeff Saut recently said to buy select stocks even though that Dow Theory registered a sell signal. He's received lots of questions as to why he did so and addressed this in his recent market commentary.

Mainly, his bullish stance (at least in the short-term), stems from massively oversold levels in the markets. He also bases this on the backdrop that the economy is not headed to a recession. He writes,

"My controversial non-recession 'call' is driven by the fact that industry analysts are still bullish on earnings with the S&P 500's consensus estimate approaching $114 for 2012. Corporate insiders are clearly bullish as they have been buying their own company's shares at the highest rate since the bottom in March 2009. Layoffs have slowed and while the economy is certainly slowing, metrics like L.A. seaport traffic, railcar loadings, etc. are not falling off a click like they did prior to the 2008 recession."

We pointed out massive insider buying two weeks ago as well. More than anything, Saut is convinced that a confluence of indicators reinforce his belief that select stocks are cheap. You can view Saut's favorite stocks here.

Embedded below is Saut's recent investment strategy where he outlines how the current market action is somewhat parallel to that of October 1978 and 1979:



You can download a .pdf copy here.