Next wave of market trouble will create buying opportunity, Wall Street bull Jeff Saut says

Wall Street bull Jeffrey Saut sees near-term trouble materializing into a solid buying opportunity.

According to the Raymond James chief investment strategist, there's a high probability an unnerving pullback could drag stocks down as soon as this week.

"We're a little overextended in the short-term," Saut said Wednesday on CNBC's "Trading Nation." "Some of the market's internal energy has been used up."

Saut builds his forecast on a basket of special indicators that he's gathered over five decades on the Street. Based on what they're telling him now, the S&P 500 is vulnerable to a 3 to 5 percent drop from current levels.

"You probably pull back to something like 2,500 to 2,550 on the S&P 500," he said. "I don't think it goes lower than that. I do not think we get a retest off that kind of sequence since the December 24 low."

That's the day of the unprecedented Christmas Eve market plunge, "some of the most intense selling that I've seen in a long time," said Saut.

By Dec. 26, a historic rally sent the Dow soaring 1,086 points and reversed the damage.

He called the bottom in early January. Despite his near-term trouble call, Saut is confident stocks will reach new all-time highs in the second half of this year based on strong economic fundamentals and earnings.

And, he's ready to roll out his buying plan for the next pullback.

"I continue to like technology and health care," he said. "I like the two out-of-favor sectors of energy and financials. I think they're cheap, and good things tend to happen to cheap stocks."

Challenged, indeed.

The Energy Select Sector SPDR and Financial Select Sector SPDR ETFs are down almost 21 percent and 14 percent, respectively, in the past 52 weeks.

"The pullback is for buying," Saut said. "We're in a secular bull market that has years left to run."


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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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