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Excerpt from Raymond James strategist Jeffrey Saut's latest essay, published Monday (May 25th):

...[T]he SPX bottomed that Friday (3/6/09) at 666, and has never looked back, as the index galloped into the longest buying stampede of my lifetime! Indeed, the buying stampede is now legend at 51 sessions without anything more than a one- to three-session pause/correction. Being an “odds player,” we have, at the margin, missed the past 20 “relatively” upside sessions, having sold our remaining trading positions near session 30 in the upside skein.

Worth noting, however, is that those positions are only roughly one-point higher than they were at what we think was the rally’s momentum “peak” of April 17th. To be clear, it feels like the major indices are in the process of forming an intermediate “top” with the insiders selling stocks like mad, many of the leading groups breaking below their respective relative strength support levels, the major indices showing weakness despite their decent breadth reading, and upside over downside volume (and upside points vs. downside points) indicators screaming “sell.”

Still, as previously stated – we can find NO instance where the major indices have “sprung” from a generational oversold low reading (like March 2009) into a six-week, straight up rally, and subsequently came back down and retested, or broke, those reaction “lows’ in ANYTHING less than three months (sometimes it’s six months).

Accordingly, despite the fact that the “buying stampede” is clearly ready to be broken with a 7% - 10% correction at any time, we don’t think the equity markets are vulnerable to a more serious correction until we enter June.

Yet the current environment feels like a “stoopers’ market” to us. Verily, I first heard about “stoopers” when I accompanied my father to a horse racetrack in Northville, Michigan. ...I asked my dad, “What are the people doing that are bending over and picking up the castaway betting tickets that litter the floor?” His response was, “They are called stoopers and they are collecting the discarded betting tickets in hopes that some unknowing soul will throw away a winning ticket because he/she doesn’t understand the intricacies of betting.”

And that, ladies and gentlemen, is what the current stock market environment “feels” like to me – a stoopers’ market – in that most of the participants that missed the “lows” back in early March are now bending over looking for the “winning tickets” the unobservant players have missed. The only problem is the observant players have already made their money and have hedged, or sold, their gains in anticipation that the “easy money” is over.

Regrettably, that is where we find ourselves. For example, our recommendation of restaurant analyst Brian Elliott’s “scorched earth” portfolio in early March has gained more than 100%. Therefore, we have advised those folks that heeded that “buy recommendation” to sell half of said portfolio to realize those gains; and, then NOT be afraid to be right on the remaining half of that four-stock portfolio’s ability to potentially achieve another 100% gain.

Unfortunately, too few investors listened and only now are looking to lever portfolios into “long” positions. And all we can say to that is that if you are going to buy something right here, only buy partial positions, and then only buy something that is unlikely to hurt you too badly if the equity markets correct by one-third.

In past missives we have recommended names like 10%+ yielding ING Risk Managed Natural Resource Fund (IRR), which has narrowed its discount to net asset value [NAV] from double digits to its current 3%. And today, we offer for your consideration double-digit yielding Calamos Strategic Total Return Fund (CSQ), which is currently trading at a 10% discount to its respective NAV. As always, terms and details should be checked before purchase.

The call for the next two weeks: ...[O]ur sense is the equity markets are forming at least a near- to intermediate-term TOP and we are cautious. As Sy Harding writes, “Our Seasonal Timing Strategy is now in its unfavorable season. Our non-seasonal Market Timing Strategy is now on a new sell signal (as of the close on May 13). We remain on the recent buy signal for gold; and, remain neutral on bonds.”

Indeed, over the past few weeks technology, retail, housing, and cyclicals have broken their relative strength uptrends that have been intact since the March lows. Whether this turns out to be just another shallow correction, or something more enduring, will likely be determined by those groups whose relative strength still remains intact. Such groups include financials, agriculture, chemicals, oil drillers, and emerging markets. We continue to favor emerging / frontier markets and as ISI’s Francois Trahan notes, “If you are bullish on U.S. equities, global stock markets have become more correlated over the past decade. And, generally when the S&P 500 has risen it has underperformed the global equity complex.” Obviously, we agree . . .

Source: Saut: Buying Stampede Could Break in Early June