Back on November 8, following the mid-term election market surge when trader hopes for another BTFD moment briefly peaked (before being promptly snubbed) and JPMorgan’s Marko Kolanovic tripled down on his bullish call for stocks, one prominent contrarian voice emerged when Dennis Gartman said that he was “officially recommending shorting this rally.” In retrospect he was spot on. Fast forward to today, with stocks substantially lower and with traders increasingly concerned whether this time buying the dip will work (it won’t according to Morgan Stanley), when Dennis Gartman has spoken again, and in his note to clients writes that “it seems wise then to cover in our material short position for a very short while; to take the substantive profits that have accrued and to wait upon the sidelines for the markets to once again become over-bought.”
That said, the world-renowned commodity guru isn’t capitulating on his bearish call, and will merely wait for “strength into which we shall sell that which we are covering today and a bit more. We have the luxury of doing so and we shall take advantage of that luxury.”
Credit where credit is due: after several years of ill-timed attempts to top and bottom-tick the market, this time Gartman got it spot on. Will his bottom-call be as successful as his bearish inflection point two weeks ago: find out in the next few days.
Here is the full excerpt from the latest Gartman Letter:
The markets are bouncing a bit and they need to do so given the severity of the recent declines and given the normal propensity on the part of equities to correct themselves after moving violently in one direction. That much needed bounce has begun and it may last a week or two… even perhaps three, although we have our doubts as to the latter. But with the CNN Fear & Greed Index having found “support” in the low single digits for the past two weeks, it is signaling how severely over-sold the global equity market has become and it is signaling that a bounce is warranted.
To that end, it seems wise then to cover in our material short position for a very short while; to take the substantive profits that have accrued and to wait upon the sidelines for the markets to once again become over-bought and into which strength we shall sell that which we are covering today and a bit more. We have the luxury of doing so and we shall take advantage of that luxury.
However… and this is yet again another one of those import “however” that have become more and more common… covering our short positions does not mean even for a moment that we are turning bullish of shares and shall be buying them to be long for we are not and we shall not. This is a bear market and in bear markets one can have only three possible positions: very short; modestly short or neutral. We’ve been of the former of late; we are going to be of the latter for a few days. It is that simple.
That said, let’s first understand how substantive is the global bear market. It is one thing to say that our rather narrowly defined International Index is down materially for the year to date, but it entirely another to note just how broad is the weakness in stocks around the world. Barrons’ lists “Key Foreign Stock Market Indices” each week and lists 44 different exchanges or indices. Of those 44, only 6 are higher for the year to date.
As for the “internal market numbers” here in the US we draw attention to the fact that the CNN Fear & Greed Index has risen a bit from 7 to 14 but even so it remains below 20 and as we said here yesterday and the day previous, 7 is the lowest level to which this index has fallen since the spring of this year and again several weeks ago when it had fallen to 6. The market is egregiously, preposterously, violently and almost unprecedentedly over-extended to the downside but… and again as we said here yesterday and as is being proven correct as the stock index futures are trading briskly lower as we write… sadly we fear that stocks generally have even further to go to the downside before they can turn for the better. We remain steadfastly bearish and once again we shall suggest strongly that strength is to be sold into; weakness is not yet to be bought.
In light of this morning’s spike in futures, any Gartman-fading algos out there are understandably confused.
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