Excerpt from Raymond James strategist Jeffrey Saut's latest essay (published Monday, April 4th):
...Last week we saw an improvement in private sector payrolls, the ISM manufacturing report was solid, pending home sales were better, and corporate layoff intentions fell. The result left all the indices we follow higher on the week. The star, however, was the D-J Transportation Average (TRAN/5370.47), which leaped 3.13% and in the process traded above its February 17, 2011 high (5298.10) to a new reaction high. Unfortunately, the D-J Industrial (INDU/12376.72) has not confirmed the Trannies with a like move above its February reaction high of 12391.25. If the Industrials do confirm on the upside, it would be the third Dow Theory “buy signal” in the past 10 months.
Potentially telegraphing a move higher are the S&P SmallCap 600, and the S&P MidCap 400, indices that have now recorded new all-time highs; and, the Russell 2000 is close to doing the same. To us, the S&P 500 (SPX/1332.41) is poised to go higher. The only question is will we get a one- to two-week pullback / consolidation to alleviate the overbought condition (see chart below) before we head higher?