"The past three days have been highly unusual. It has been rare in the past 50 years to see such a strong blast off of a 52-week low, whether judged by daily price changes, the flow of volume into stocks that are rallying or many other gauges. Mostly, it suggests exhaustion short-term but good signs in the medium- to long-term." . . . Jason Goepfert, The SentimenTrader (February 17, 2016)

Well, we didn't quite make it to the envisioned 1950 level on the S&P 500 (SPX/1917.83) yesterday as the SPX failed to better Wednesday's intraday high of 1930.68 and subsequently fell nearly 9 points. The action brought on questions like this: "You have mentioned before that to break the back of a 'selling stampede' you need to see more than three consecutive sessions on the upside. With the DJIA down 40 points today, does that mean the selling stampede is not 'officially' over?" While markets can certainly do anything, I think the "selling stampede" is over, even though it would have been better to see a fourth positive session. Indeed, such stampedes typically only have one-to-three session counter trend moves, still yesterday looked like a consolidation day to me, after a 121 point pop in the S&P, and not a resumption of the stampede. The "must have" SentimenTrader seems to agree, as in Wednesday's note the sagacious Jason Goepfert wrote:

"It's over! The S&P 500 has emerged out of correction territory. Using the arbitrary, but commonly accepted definition of a -10% decline, the S&P has moved out of the danger zone after having been submerged for the last two weeks. When it has poked its head above the correction zone in the past, it has usually kept going. How investors reacted in the short term had a dramatic impact on longer-term returns, suggesting that if buyers persist in the coming week, it bodes well for the coming months."

Wal-Mart's ~3% slide yesterday, on weaker-than-expected revenues and same-store sales, was responsible for much of the D-J Industrials (INDU/16413.43) 40 point slide, so we will find out today if yesterday was indeed just a consolidation session or something more. If you are looking at sectors, by our work the only sectors of the S&P 10 macro sectors that are overbought on a near term basis are: Consumer Staples, Telecommunications and Utilities. (continued on page 2…)

The Technology sector continues to look "cheap" with a PEG ratio (price to estimated growth) of only 1.4, while Utilities trade at a PEG ratio of 3.2. Ladies and gentlemen, if you think utilities are going to grow faster that technology, I have a few yards of swampland south of here I would like to sell you! There are a number of tech names currently recommended by our fundamental analysts, with a Strong Buy rating, and we suggest consulting your advisor for said names. This morning the S&P preopening is flat on no real overnight news, which is consistent with a stock market whose internal energy has waned. We expect that to continue into the first week of March with only small pullbacks for stocks.

Jeffrey D. Saut is chief investment strategist at Raymond James.