A 5% to 7% Correction Leads to a Santa Claus Rally? Sounds Good to Me

I love the idea of the pause that refreshes.

In a note to clients this morning, Saut writes that his market timing models "continue to counsel for caution in the short-term." If he's right, as he explains in the attached video, it could be just the thing investors need to finish an otherwise awesome 2013 on a high note.

"I think (a 5-7% correction) sets up the fabled Santa Claus Rally," Saut says, adding that he thinks the ensuing rally will likely carry on past Christmas.

"I think we're going to do pretty well in the new year," he predicts, noting the seasonal statistics that have made December a very hard time of year to be short stocks.

I think tapering will torpedo the markets for the short term but will be a great time to get in there and buy. Some companies are doing really well without the need for the FED's funny money. Other companies seem to be hoarding cash and are not sure what to do with it.

Then we have energy independence with some wind at our back which could make for a new renaissance in manufacturing in the US. However, higher interest rates which will come out of tapering might be bad for housing but I think America as a net exporter of energy will be a game changer.