Just hours before the November 30 Vienna OPEC meeting, whose outcome sent the price of oil soaring, Gartman had a recommendation: “we are short of crude oil from yesterday; we’ll have stops on those positions on a closing basis this afternoon here in the States, with the intention of adding to those short positions once the OPEC meeting is behind us.”
Oops: following the same day’s 6% surge in oil, on December 1, Gartman had no other choice but to say that “clearly we were wrong/early/ill-advised in being short of crude one day before the official OPEC meeting but clearly too we remain suspicious of the cartel’s ability to keep its members aligned. Clearly we shall err bearishly of crude, but not for the moment, but perhaps later this month… perhaps.”
Or not. Because less than two weeks after warning he would “err bearishly on crude later this month”, Gartman has decided to throw in the towel, and arr bullishly on crude instead, to wit:
… although there seems to be no discernible shift in the term structures in the nearby futures as evidenced by the price matrices just below, there has been a material shift in the longer-term term structures as the contangos have indeed narrowed very sharply since yesterday. The averaged one year front month contango for Feb ’17/”Red” Feb ’18 has narrowed from $2.63 yesterday to $1.88 this morning. Further, it has narrowed from $2.64 one week ago, and perhaps most importantly it has narrowed from $5.08 one month ago! The tectonic plates have been and are continuing to shift beneath the “feet” of the crude oil market.
Perhaps most notably, the May ‘17/May ‘18 contango has disappeared entirely and is now in backwardation as “informed money” seems now to be betting that the OPEC/non-OPEC agreements on production cuts may actually succeed.
Finally then, recalling Lord Keynes’ admonition that when the facts changed regarding markets that he had been involved in he changed his opinion, we see the facts of the shifting term structure
changing the composition of the crude oil market materially. Note then that Brent… and for that matter too, so also WTI… “gapped” higher yesterday and that that gap remains open as we write this morning. Barring material reasons not to do so, when markets “gap” higher we buy them and we shall buy crude oil this morning as a result.
The result, is a new “trade recommendation” for “clients” as follows:
NEW RECOMMENDATION: We know that this shall catch many off-guard given our marked propensity to have erred always bearishly of crude, but with the term structure shifting as bullishly as it has and with the markets for WTI and Brent having “gapped’ higher yesterday, and with those “gaps” still intact, we’ve no choice but to buy crude oil this morning upon receipt of this commentary.
We shall not wish to risk much on this trade; the bottom of the gaps in front month WTI and Brent shall suffice; that is, if crude does close the “gaps” left to the upside we’ll exit the position. For now, we shall buy both February WTI and Brent upon receipt of this commentary… a “unit” of each being more than sufficient… happy to be buying it nearly $2/barrel below the highs of yesterday and as the markets are “correcting” that initial panic buying.
Incidentally, this is the same Gartman who on September 7 told CNBC that “investors shouldn’t expect the commodity to break through $55 for a few years.“
As of this moment, Brent has “broken “through $56… and Gartman, who in January predicted that crude won’t rise “above $44 again in his lifetime” has flip-flopped to bullish.
Finally, for those wondering what is Gartman’s position on stocks at this moment, here is the answer: “we shall iterate that we are not suggesting that the market here in the States is so egregiously over-bought that it should be sold short into for this remains a bull market and in bull markets one can have only one of three possible positions: Very long of equities; reasonably or “pleasantly” long of equities, and neutral of equities. We are strongly urging the latter.”