On the heels of markets plunging in China, today King World News is featuring a piece from one of the greats in the business discussing the chaos in China, Russia massing troops, a Greek wildcard and the ECB warning of a major threat to financial stability.

By Jeffrey Saut, Chief Investment Strategist at Raymond James

May 28 (King World News) – "In your report this morning you discussed that you have to have the ability to adjust to being wrong. In other words, you can't be too stubborn. You must have a certain degree of flexibility as to what's going on." — A TV anchor speaking to me

I replied, "Yes, my father always told me, 'If you are going to be wrong, be wrong quickly with a de minimis loss of capital.'" Tuesday's verbal exchange with said anchor brought back memories of another iconic quote from Peter Bernstein. To wit, "After 28 years at this post and 22 years before this in money management, I can sum up whatever wisdom I have accumulated this way: The trick is not to be the hottest stock-picker, the winning forecaster, or the developer of the neatest model; such victories are transient. 

The trick is to survive.  Performing that trick requires a strong stomach for being wrong, because we are all going to be wrong more often than we expect.  The future is not ours to know.  But it helps to know that being wrong is inevitable and normal, not some terrible tragedy, not some awful failing in reasoning, not even bad luck in most instances. 

Being wrong comes with the franchise of an activity whose outcome depends on an unknown future (maybe the real trick is persuading clients of that inexorable truth).  Look around at the long-term survivors at this business and think of the much larger number of colorful characters who were once in the headlines, but who have since disappeared from the scene."

Speaking of being "wrong," and having the ability to adjust, I certainly didn't see Tuesday's Tumble (~226 points) coming, having continued to favor an upside follow-through to the previous week's breakout to new all-time highs. Still, I did write that if there was a decisive break down below the S&P 500's (SPX/2123.48) 2115 level, it would be a red flag for short-term trading accounts. I also added that for investors a pullback into the 2090 – 2100 support level would still leave the intermediate uptrend intact.

Sure enough, when 2115 "fell," a trapdoor opened as the SPX spiraled smack dab into that 2090 – 2100 support zone. From there, stocks stabilized and spent the rest of the day trying to regain their composure. Now those of you who know me understand that I am not afraid to admit to being wrong and to adjust accordingly. So at the risk of violating Leon Levy's admonishment, "You can't be too stubborn," I remain in favor of the upside.

My work shows there is still sufficient internal energy to power this market back towards last week's high. If so, and we fail to break through to new all-time highs with a subsequent "fail," then I will admit to being wrong and will have to adjust my near-term strategy. This morning, the dollar is lower and oil is higher as Chinese shares plunge on higher margin requirements, Russia masses troops on Ukraine border, Greece remains a wildcard, and the ECB warns slow growth is a threat to financial stability. Yet, the preopening futures are flat. ***ALSO JUST RELEASED: Wild Swings In Major Markets And A Possible Surprise From The Fed CLICK HERE.

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