Whereas “world-renowned commodity expert” Dennis Gartman has kept a relatively low profile for the duration of the recent market blow-off top and sudden drop, this morning he points out something interesting, and asks a question: “Is this the most important trend line of the year?“
Here’s Gartman the technician, pointing out – correctly – that the S&P has broken a key support level:
In almost text book fashion, the S&P future has fallen to … and actually a bit through…this very well defined trend line extending back into November of last year and for it to hold the market has to open sharply higher and hold those gains… events we doubt very seriously shall happen.
The trendline in question:
Some more of his market observations:
SHARE PRICES HAVE FALLEN PRECIPITOUSLY AROUND THE WORLD with nine of the ten markets in our Index having fallen and with 8 of those 9 having fallen by more than 1% while 2 of the 9 have fallen by more than 2%… the market here in the US and the market in Japan, with the former having fallen by 2.1% and with the latter having fallen by 2.5%. Interestingly, the stock market in mainland China has actually risen quite sharply… by 1.6% from where we had marked it on Friday… even as share prices in Hong Kong have fallen by 1.2%.
Here in the US, the slide was “across the board” as there were 8.4 companies’ shares that were down on the NYSE compared to each 1 that was higher while the were were 12.26 shares in volume to the downside compared to each 1 share that traded higher. The numbers were not quite as bad on the NASDAQ as they were on the NYSE, for there “only” 5.2 shares were trading lower compared to each 1 trading higher and the volume was “only” 3.62:1, but this was still a rout to the downside nonetheless.
Historically, the early months of the years of the past several have been, shall we say, “problematic,” with prices seemingly given to weakness. For example, in early ’14 the Dow fell from approximately 16,250 to 15,350 or 5.5%. In the first weeks of ’15 the Dow fell from approximately 18,000 to 17,100 or 5.0%. In very late ’16 until the first few weeks of ’17, the Dow fell from 18,000 toward 15,750, or a bit more than 12%. So given that the Dow’s fall from approximately 26,600 at its peak to 25,450 as of the close on Friday it is down “only” 4.3% from its high so it has some way to go to the downside just to be “average” and we fear that this shall be anything other than average.
Most importantly of all, however, is that this sell-off was not only of US shares and cannot be blamed upon rising interest rates here in the US, but rather this was a global sell off of consequence with rates rising everywhere and with the selling very nearly universal in nature. Overnight, as the markets in Asia “caught down” with the weakness in North America and Europe on Friday, US stock index futures traded sharply lower, but they have rebounded from their worst levels… marginally.
As evidenced by the chart [on top] the trend line that has defined the bull run since mid-November was tested on Friday at the market’s close but is being violated to the downside as we write despite the marginal “bounce” from the worst levels seen earlier today. In order for this trend line not to be violated the nearby S&P future has to rise 2,760 or higher and as we write it is trading 2,748.
And the conclusion:
Things look bad; need we really say more save for the fact that real, longer term support for the S&P futures exists at the 2650-2675, another 75-100 S&P points from where the markets stand as we write.
Will Gartman be right this time? Find out shortly.
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