Saut expects bottom next week, then stock rally

Jeff Saut, chief investment strategist at Raymond James, said Friday the stock market looks like it’s searching for a bottom. Using a propitiatory forecasting model, he predicted it would happen next week, followed by a sharp rally. That model actually foresaw the 2015 summer swoon, but missed what he expected to be a “rip your face off” rally in late December.

The Federal Reserve will likely hike interest rates only once or twice this year, Saut said Friday on CNBC’s “Squawk Box” just after the release of the government’s January jobs report.

The U.S. economy created fewer-than-expected nonfarm payrolls of 151,000 last month. The unemployment rate dipped to 4.9 percent, the lowest since February 2008, compared with estimates for a 5 percent jobless rate.

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The jobs report will be parsed by the Fed and market watchers alike to see whether the economy is strong enough to withstand another rate hike at some point. Central bankers raised rates for the first time in more than nine years in December, and signaled at the time four more increases in 2016. The terrible new year start has put that path into doubt in the minds of traders.

On CNBC Friday, Saut said all the earmarks are there to put in a floor, including “more Google searches for the term ‘bear market’ since March of 2009 and investment banks telling you to sell everything.”

“The model is calling for a bottom some time next week, and a fairly sharp rally after that,” he said, though he would not put a number on it. He did say stocks should be higher at the end of the year than they are now.

In making his optimistic case, Saut argued that when this earnings season is all said and done, it’s actually going to be better than expected. He also said, excluding the oil patch, the U.S. economy looks pretty good, despite the doom and gloom sentiment that’s prevailing in the markets.

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On Monday, Saut had told “Squawk Box” the “selling stampede” that led to the worst January for Wall Street since 2009 may have ended with the start of a two-day rally the previous week.

During this uneven week, the Dow Jones industrial average was coming off a two-session rally ahead of Friday’s trading. But blue chips did drop sharply Wednesday.

In December, Saut forecast a “rip your face off-type rally” that failed to come to pass. He attributed that to the expiration of $1.2 trillion worth of options and futures that destroyed the market’s rhythm.

Earlier last year, Saut accurat

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