Raymond James' Jeff Saut sounds all clear for stocks after sharp bounce back

Trade war fears were overblown and stocks can now resume their upswing after retesting the February lows, says Raymond James chief investment strategist Jeff Saut.

The correction is over, "unless you get hit with some exogenous news," said Saut. "I think trade war is the wrong thing. I think there's a big difference between a trade skirmish and a trade war."

"You're talking about only a few goods, and you're talking about a minuscule amount of money, and in the scheme of things, there's never been true fair trade. This thing about fair trade is a spoof," he said.

Saut said he expects that stocks have formed a "W-shaped" bottom similar to the one in the last major correction in late 2015 and early 2016, where the market hit a low in September and then another in February 2016.

Stocks bounced hard Monday after Treasury Secretary Steven Mnuchin on Sunday said he was optimistic a trade agreement could be negotiated with China.

"I think the recent correction was overdone. I did not candidly expect a retest of the February lows. That was a wrong-footed call," he said.

The S&P 500 did not hit the low set in February at 2,533, but it did touch its 200-day moving average Friday when the market was plunging into the close. That unnerved traders who had to wait all weekend to see if the test would be successful.

The S&P bounced from the opening Monday, ending the day up 2.7 percent at 2,658. Technical analysts said it appears the 200-day support level will hold, but it could take several sessions to confirm.

The 200-day moving average was at 2,586 Monday. The widely watched indicator is used to watch price trends, and it's simply created from the average of the last 200 days' closes.

Saut said the market's negative reaction to trade headlines was unusual. "I've never seen euphoria turn to fear so fast. That's what happened," he said, adding the market was also extremely oversold.