So much flip-flopping from Dennis Gartman in just the past week, it is enough to make one’s head spin.
After missing Friday’s move lower, on Monday morning Gartman said he was actively looking to “re-establish net short positions” when S&P futures were sharply lower to which we said “at the rate the S&P is covering its opening losses, he should be able “find a point” where the S&P turns green, and “reestablish shorts” on very short notice.” Indeed, in just a few hours the S&P covered its entire move lower, and provided Gartman with ample opportunity to become short again. Of course, the very next day, US equity markets soared allegedly on the best consumer confidence print since 2000, and following the biggest two day drop in the VIX in years.
So where is he now? As he says in his latest letter, “We have no choice but to follow the “lead” from the CNN Fear & Greed Index and to be bullish of equities.“
Here is how he explains this latest momentum chasing:
STOCK PRICES… EVERYWHERE… ARE HIGHER AND SHARPLY SO as all ten of the markets in our International Index have risen. This is a rare event and historically such unanimity amongst our “universe” of markets has marked important panic tops if this has happened after extended bull runs, or has marked important panic lows at the end of extended bear runs. Certainly this is not the latter. We obviously have considered the markets overextended to the upside and have been reticent about buying into them aggressively. As we said the other evening when on CNBC’s “Fast Money,” and as we’ve said countless times here in TGL, this is a bull market and in a bull market one can have only one of three possible positions: Very, aggressively long of equities on balance; pleasantly long of equities on balance or, finally, neutral of equities, and there is no question but that we’ve tended to err upon the latter two positions and “Err” is the proper word here for we have indeed erred.
Those who’ve thrown caution to the investment wind and have remained aggressively long have reaped their rewards and we applaud them for either their tenacity, or their brilliance or their obeisance to the trend. We have been “too cute by half” in fearing a correction that never seems to avail itself.
Given the recent weakness in the CNN Fear & Greed Index we were coming very close to buying equities aggressively, if only had this Index fallen to 20 or below, having been to 85 only a few months ago. It fell to 29 yesterday… close to 20 but not quite there. It has turned up from there. If that was this indicator’s low it shall be the fifth time in a row that it has made a progressively higher low since late ’14. Previously, going back to late ’14, the lows were very near to 0; then 5 in the autumn of ‘15; then 15 in the first few days of ’16; then 15 in the late autumn of last year and now 29.
We have no choice but to follow the “lead” from the CNN Fear & Greed Index and to be bullish of equities. To make it simple we shall return to our original thesis regarding the Trump Adminisration and defer to the “Mahoning Valley” rather than to Silicon Valley; that is, we’ll buy steel, and coal, and ships, and railroads and ball bearings and cement and weaponry et al, for if the Trump Administration does stand for anything it stands of infrastructure and defense. These things we can count and these things we can count upon. These things are simple being the things that if dropped on your foot shall hurt:
And some bad news for rate bears: Gartman is shorting Trasurys, and not just one, but “two units.”
We were fortunate enough to have gotten long of the US Ten year note future several weeks ago and were further fortunate enough to have exited the trade late last week. Given that the market now appears to have forged a rather impressive “quadruple” top as evidenced by the chart this page, and given that the market’s weakness yesterday was on larger volume that has come in on the downside; and given further that the Fed is clearly erring on the side of tighter monetary policies, it is reasonable that we should venture to the short side of the bond market today, selling two units June T-notes at or near to 124 3/8’s-124 ½ and our stop shall be a close above 125 1/4. If we are able to sell a rally and then if notes close below 124.00 we’ll add a third unit to the trade… willingly.
Ironically, Gartman is shorting TSYs even as he admits “we here at TGL, in our retirement account, ended the day up 4.8% for the year-to-date, heavily invested in medium term closed end bond funds.” Perhaps that is indeed the best hedge: being long and short at the same time?