On Tuesday, just days after Gartman made what he called a “watershed call“, in which he confidently declared that “equity markets have hit a multi-year top”, Gartman’s confidence was suddenly crushed, or as he put it “shaken” after the recent spike in volatility which in addition to the sharp down moves, saw one of the biggest point surges in the Dow in history.
We note then that the CNN Fear & Greed Index has fallen back to ‘single digits” and that is as good a measure as we can find to show how enormously over-sold the market had become. But even still, weakness is not to be bought and strength is still to be sold into. Again, we trust we are clear.
Just as clearly, however, we were wrong; the seriousness of the market’s over-sold condition and the change in psychology as the trade protection/tariff talks moderated over the weekend and into yesterday morning with Mr. Mnuchin’s comments to that effect was such that a massive “relief” rally was unleased [sic].
Still, despite the occasional eruptions in the US equity markets, Gartman – for once – did not flip flop immediately in response to a market that proved far more volatile, and was reluctant to instantly go Gartman’s way, even though, according to Gartman’s “watershed” read of events, it was all downhill from here, save the occasional sharp bear-market short squeeze:
To that end, we are remaining short of the equity market here in the US with stops on our positions drawn down materially to make certain that our once material profits are not turned into losses, but we are otherwise holding to our thesis that stocks have entered into a global bear market; that the high made by our International Index on January 29th shall not be violated and that the proper course of action by those who are long of equities is certainly to avail themselves of this opportunity to reduce the exposure one more time before that opportunity is lost.
… And yet, as we reported last week, Gartman left himself a loophole: a short-covering stop once the S&P hits 2710.
The futures closed last evening at $2660. We shall hold our stop at $2710 on a closing basis here in North America… hopefully protecting a once material profit from becoming a loss.
Well, scratch all of that, because the stoic patience which we applauded Gartman for just a few days ago was dead and buried overnight, when – even though the S&P was far below his stop-out level – the “world-renowned commodities guru” decided to close out his short anyway… and yes, despite his so-called “watershed” market top call, in which he clearly no longer has any confidence. Here’s what happened, allegedly, in Gartman’s infamous “retirement account:”
THE S&P: Well, It Does Appear that the Trend Line’s Held, Doesn’t It? The “hedgers” are long and the “specs”… both large and small… are net short while history tells us that betting with the Hedgers is the better cousre of action. Having been short we are heading for the sidelines… at least for a short while anyway.
And the explanation:
We are, and we have been, short of equities for the past several weeks and we are nicely ahead on the trade for even with Thursday’s strength we are still ahead by a bit more than 3%; however, in the very short term perhaps stocks are oversold enough to warrant a material bounce. We note, for example, that the CNN Fear & Greed Index is… and has been… mired in “single digits” for the past several weeks and was 8 on Thursday compared to 7 on
Wednesday. Drawing attention then to the longer-term chart of CNN’s index we note the apparent similarity between what is happening now and what was happening back in mid-to-late 2015 when the S&P rallied from approximately 1810 to 2100, having fallen earlier in the year from 2100 to 1810!
We are still convinced that a bear market of some long-term consequence is upon us, and therefore we are to have one of three possible positions: Very short; modestly short and neutral. We cannot be long of shares for as stated we are convinced that the highs of late January are inviolate, but perhaps for a short while as the usual vicious, short term short covering rally obtains it might be better to be demonstrably less short, covering in all of that which we are short of and hiving off to the sidelines for a short while.
On Friday we did very little in our retirement account, but we shall be covering in a goodly portion of our short derivatives position on Monday, barring some unforeseen geopolitical problem that might evolve over the long weekend that might serve to change our analysis. As we cover in our short derivatives position we shall be adding to long positions sufficient to tip our position as quickly as we are able to neutrality.
And with that, Gartman’s “watershed call”, not to mention his “reputation” have once again been jettisoned into the flip-flopper’s ether where momentum chasing “experts” are a dime a dozen.
Naturally, all of this is great news for the bears.
via RSS https://ift.tt/2J8HxNz Tyler Durden