I called August bottom, now I see top: Jeff Saut

Fed won't take 'punch bowl' away this year: Pro

Market watcher Jeffrey Saut, who correctly called the August bottom, said Thursday he sees a "trading top" for stocks in the next few days.

In an appearance on CNBC's "Squawk Box" on Aug. 21, the chief investment strategist at Raymond James credited a proprietary market timing model for signaling a floor during the summer swoon. Just days later, on Aug. 25, the Dow Jones industrial average, the and the Nasdaq composite hit to their closing lows of the year. After testing but not breaching those levels over the next month or so, the Dow, S&P and Nasdaq since late September have all risen more than 10 percent as of Wednesday's close.

"The model turned negative the first week of July. It called the bottom," Saut recalled on "Squawk Box" Thursday, saying, "The model [now] is actually calling for a trading top this week or the first three days of next week."

Advising investors to be cautious, he said: "I do think there are times when you can play hard and times you should not play so hard. Right now, we don't think you should be playing as hard as you did at the August and September lows."

As of Thursday morning, the Dow is within 1 percent of breakeven for the year. The S&P is up 1.2 percent in 2015, while the Nasdaq has risen 7.1 percent this year.

Saut sees the stock market taking a dip in the near term, but then trading higher into year-end — predicting the Federal Reserve won't raise interest rates for the first time in more than nine years until sometime in the first quarter of 2016.

"My guess is it's not going to be in December," Saut contended, saying he's not buying the Fed's message in its policy statement Wednesday aimed at keeping a December rate hike alive. "The Fed, looks like to me, they're not going to take the punch bowl away."

"While the economy is slowing, it's not falling off a cliff," he said, ahead of Thursday morning's release of the government's first estimate of third-quarter economic growth.

The reading on gross domestic product showed expansion at a 1.5 percent annual rate — slightly below estimates and less than half the 3.9 percent advance in the second quarter. Despite the slowing growth rate in the third quarter, domestic demand was solid, a possible check in the hike column for Fed policymakers.

But perhaps a reason not to increase rates, the personal consumption expenditures price index (PCE), a Fed favorite, rose at a 1.2 percent rate in the third quarter. Excluding food and energy, the PCE core rate increased at a 1.3 percent pace. Both price measures were lower than the Fed's stated inflation target of 2 percent.