Ebb and Flow Ends With Rising Tide

"I'm just sitting here watching the battle between light and dark," Raymond James' chief equity strategist Jeff Saut quipped Thursday when I asked how he's doing.

Light and dark battled it out on several fronts Thursday. Dark seemed to be winning when we spoke around 2:00 p.m. EDT, but light won the day -- at least in the major stock market indices.

That said, tensions between Iran and the West escalated, rather than moving toward a peaceful resolution. The U.S. Senate passed a war-spending bill that puts the legislative branch on a collision course with President Bush, who has threatened to veto any bill that includes a deadline for withdrawing American troops from Iraq. Oil closed up another $1.95, or 3%, to $66.03 per barrel.

"You could paint a pretty ugly picture here," says Saut, who recommends a defensive 30% cash position. "I keep hearing people say, 'This is a buying opportunity.' But what if this is a selling opportunity?"

Indeed, the bears were beating stocks down midday after an early spike on a modestly upward revision to fourth-quarter GDP and unexpected drop in weekly jobless claims. After gaining as much as 80 points intraday, the Dow Jones Industrial Average spent much of the afternoon in the red. The index then clawed back to positive territory by the end of the day to gain 0.4% to close at 12,348.75. The S&P 500 finished the day up 0.4% to close at 1422.53, and the Nasdaq Composite finished up a fraction to close at 2417.88.