Jeff Saut believes we are on the verge of a “sell the news” event:
“Almost on cue, the SPX celebrated the 23rd anniversary of the October 1987 “crash” by surrendering 3.7% last Tuesday, only to make most of that loss back by Friday’s close. Still, I can’t shake the feeling the equity markets are searching for some kind of trading peak between now and the FOMC meeting. Such a timid trading strategy would be consistent with the old stock market saw, “Buy on the cannons and sell on the trumpets” because I think the “trumpets” will be the Republicans taking back the House and the Fed announcing QE2 (quantitative easing two). Both of those events should be stock-market friendly, but are likely already discounted. Clearly, we bought on the cannons last June. Accordingly, selling on the trumpets seems like an appropriate short-term trading strategy.”
Saut does, however, believe the selling will be relatively contained.