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Jeff Saut: 'Market Approaching Very Deeply Oversold Condition'

Tuesday, 2 Aug 2011 | 1:50 PM ET

Many pros are starting to fear that the stock market is on the brink of something serious. We’ve detailed the concerns at length in “Pros: If S&P Closes Below 1283, Ugly Week Ahead” Click here to go to that post.

But at least one esteemed and widely followed market strategist doesn’t seem terribly worried.

In a live interview on CNBC, Jeff Saut chief equity strategist, at Raymond James tells us that he’s spotted a sign that suggests to him the market may be oversold.

He’s watching the Dow Jones Industrials versus the Dow Transports, a market ‘tell’ known as Dow Theory. It's somewhat complex, but essentially the idea is that the action in one index should confirm the other and according to Saut that's not happening.

“(Although) Transports are in jeopardy of breaking below their March 16th low,” Saut explains, “ the DJIA is not. The downside is not confirmed,” he says.

That suggests the market is oversold and in fact Saut thinks we're quickly approaching a tradable bottom. "I do however think we’re approaching a very deeply oversold condition and in the next couple weeks I think we’re going to sink a bottom that’s going to be tradable," he tells us.

That’s not to say you should dive in head first. Saut concedes there are some near term headwinds and for the remainder of the week he suggests sitting on your hands "until we get through the (jobs) number coming out on Friday."

However, if the sell-off continues as so many pros expect, Saut tells Reuters he thinks 1220 – 1225 is probably as far south as the market will go.

On a related note, if and when you pull the trigger Saut has some ideas about where to put money to work. He likes stocks that have been hit for what he calls one-off reasons such as Health Care REITIberia Bank . He also likes MLPs such as Linn Energy and he's also bullish on gold .




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Trader disclosure: On Aug 2nd 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Terranova owns (XOM); Terranova owns (DIS); Terranova owns (WFM); Terranova owns (LULU); Terranova owns (MSFT); Terranova owns (TM); Terranova owns (JWN); Terranova owns (MCD); Terranova owns (PEP); Terranova owns (MA); Terranova owns (BX); Terranova owns (GS); Terranova owns (DAR); Terranova owns (CAT); Terranova owns (VRTS); Terranova owns (AAPL); Terranova owns (F); Terranova owns (CVI); Terranova owns (IBM); Terranova owns (FCX); Cortes owns (PM); Cortes owns (WMT); Cortes is short (LULU); Cortes is short (LVS); Cortes is short Copper; Cortes is short EUR/CHF; Cortes is short the AUD; Cortes is short the CAD

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