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Stocks on verge of rallying to 'substantial new highs,' market bull Jeff Saut predicts

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Stocks will move sideways, and then capture all-time highs: Jeff Saut

Wall Street bull Jeffrey Saut expects stocks to break out to fresh records, and they could come as soon as next week.

Based on his basket of proprietary indicators, the Raymond James' chief investment strategist contends the market will likely move sideways in the next several trading sessions to rebuild energy. Once it does, Saut is predicting a historic move higher.

"Our short-term indicator came into this week thinking the markets were going to be relatively flat this week," Saut said Wednesday on CNBC's "Trading Nation. " "But it picks up next week around midweek. And, I think we're going to trade out to new all-time highs."

Saut, who has been using a group of special indicators for almost a half century, believes there's little chance stocks will retreat from the record highs. He cites fewer disappointing first-quarter earnings results as a near-term bullish driver.

"They're going to continue to come in better than expected," said Saut. "Analysts ratcheted down their earnings expectations way too low. And, now you can see that they're reversing that to the upside."

Saut expects the S&P 500 to exceed 3,000 by year's end, a gain of at least 4% from current levels. The index is already up 16 percent this year and more than 23 percent since the December low.

"The history of secular bull markets is they last 15-plus years," he added. "We ought to have at least another five, six [or] seven years left in it, and nobody believes it."

Investing for the next phase

For the next phase of the 2019 rally, he recommends looking at energy stocks, which have been underperforming the S&P 500 and oil over the past year.

"I still like old tech, not the FANGs, per say, but the older technology companies," he said. "Technology is way under-loved, under-owned. "

Saut is critical over FANG names — Facebook, Amazon, Netflix and Google parent Alphabet — because of their high valuations.

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Stocks will make 'substantial new highs' and keep them, Jeff Saut predicts