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Excerpt from Raymond James strategist Jeffrey Saut's latest essay:

The pricing action leaves us with two “marks of the bear.” The first is at the July 15th low of 10828 for the Dow and 1200 for the S&P 500 (SPX/1260.31). The second is at the July 28th lows of 11125 and 1234, respectively. A downside violation of the latter should be viewed as a “warning flag,” while a violation of the July 15th “lows” should be viewed as a dangerous occurrence.

As repeatedly stated, we don’t think those “lows” will be penetrated in the short/intermediate-term, believing that the markets are attempting to stage an upside 17- to 25-session “buying stampede” with a minimum target for the S&P of 1320 – 1330. From a seasonality standpoint this also makes sense because it’s the right time of the year to extend the summer rally.

 Consequently, we “sit” with our remaining trading recommendations in the exchange-traded funds (ETFs), having already “banked” some of the profits into the July 23rd “highs.” Recall that our ETFs of choice centered on the financials, real estate, and the major market indices. Importantly, if those July 23rd highs can be bettered (1291 for the S&P; 11698 for the DJIA), it would go a LONG way in reinforcing our “call” of an upside stampede into the S&P’s 1320 – 1330 zone.

Source: Watching the 'Two Marks of the Bear'