It was to be expected: one day after Gartman’s “fair warning” that he is planning to buy gold in yen terms, gold suffered its biggest plunge since 2013.
So, inevitably, in his latest letter the “commodity guru” has unleashed a stream of platitudes regarding yesterday’s precious metal carnage:
SPOT GOLD: What a Disaster!: Gold is still up sharply for the year?to?date, but after yesterday’s debacle it certainly doesn’t feel that way! This trend line’s been broken and bounces are to be used to lighten up. We’ve really no choice, have we?
“As for the precious metals, what can one say other than “We truly didn’t see that coming!” The light at the end of the tunnel was a fully loaded train heading right for us and we smashed into it! We were concerned and indeed we voiced that concern in our comments yesterday that $1305-$1310 in spot gold could be hit and that stop loss selling could follow hard upon. However, we actually believed that the follow-on stop loss selling would be far, far less severe than it proved to be. Indeed, we had hoped that the selling would be sated quickly and thought it possible that a “reversal” would be possible. It was not.
Gold fell relentlessly, ostensibly on the news that the ECB might well “taper” its purchases of sovereign debt securities. With the Chinese removed from the market because of the National Week/Golden Week celebrations, and with the Indians reticent for whatever reason to step into the fray, gold had sellers everywhere without buyers of consequence. Do we think gold is overdone on the downside; yes, we do indeed, but so much technical damage has been wrought that any bounces toward $1292-$1297 will prove to be formidable resistance on a first bounce. For now, we have wounds to lick and heal.
Finally, because of a computer glitch, we cannot report on our gold EFT’s this morning, but we shall “on the ‘morrow.”
As for his comments on the market, here they are:
Regarding the market here in the US, the trends of the broad indices remain upward, if again we define the “trend” by the 200 day moving average of the index in question or of the individual stock. The Dow, for example, is nearly 3.1% above its upward sloping 200 day moving average and that obviously remains bullishly inclined. The S&P’s 200 day moving average continues to move “from the lower left to the upper right” and as of last night’s close the Index itself is 4.1% above that moving average. The NYSE Index is, as of last night’s close, 3.6% above its upward sloping 200 day moving average and the broad Russel Index is a stunning 9.2% above its upward sloping 200 day moving average. Clearly the trends, in broad terms, remain upward.
But… and isn’t there always a “but” of some consequence?…we are nonetheless bothered by the fact that so many of these broad indices “seem” to be turning for the worse, not the better. We are bothered by the fact that the S&P “seems” to be failing in recent day, refusing to make new highs while breaking short term, but nonetheless seemingly important, short term upward sloping trend lines as seen in the chart of the S&P this page. The same can be said of the Dow; of the NYSE and of the Russel. This we find worrisome; this is what keeps us up at night.
Finally, we found it more than merely passing strange that on the first of the month stocks did not advance. Historically, new inflows of money have taken the indices higher on the first trading day of each new month. This time that did no happen, and that has given us reason for concern. Perhaps we are uncommonly uneasy because of the damage wrought upon us by the collapse in gold prices yesterday, or perhaps we are simply a bit dyspeptic and nothing more; but we find ourselves uneasy about the equity market… very, very uneasy
This will likely be the necessary and sufficient green light for US stock to turn higher today, absent any more ECB tapering headlines of course. As for the gold trade, we will await for the “computer glitch” to be resolved before finding out if Gartman was stopped out and is no longer gold the yellow metal.
via http://ift.tt/2dtkqPs Tyler Durden