Back on March 30, Dennis Gartman – who just a few weeks earlier made a “watershed” call for a multi-year market top – confirmed he has zero confidence in his own “historic” calls, and announced he was covering his short. One trading day later, the market suffered one of its biggest drops in year, and has been struggling to defend the 200DMA since.
Needless to say, that day was good news for bears.
Now we have even better news for those just waiting for Gartman to again turn bullish before they short the market with leverage: in his latest note Gartman writes that despite some bearish action in the S&P, all he cares about is Xi’s overnight speech, and that “Xi has us remaining on the sidelines, refusing to take bearish action and actually considering doing precisely the opposite.“
In other words, Gartman – who less than a month ago said the S&P would not rise more than a couple of percent or so from current levels (as in a “multi-year top”), is now considering turning bullish again.
As excerpted from his latest note:
The closing two hours in the markets here in the US were decidedly bearish of their own however with the Dow Industrials falling nearly 400 points for the day’s high made at or near 2:00 p.m. and closing hard upon the day’s low. The S&P futures, having traded to 2,652 at its best right around 2:00 p.m. finished the day also hard upon its low at 2,613. Indeed, all things being otherwise considered at the moment, yesterday would have been a decidedly, technically important and very bearish close. For the stock market bulls, however, the speech by China’s President Xi proved to be a formidable support with the S&P futures trading from approximately 2,615 to 2,660 in less than two hours’ time.
Thus far the market has bounced; the levels of support have held but also we have noted these past several days the volumes have risen as prices have fallen and have waned as prices have risen. That, as we have said almost countless numbers of times in recent weeks and months, is not the sign of a healthy market. Indeed, we shall continue to stand by our “Watershed” comment written Wednesday, March 14th, stating very clearly that a bear market had begun, and that weakness henceforth was not to be bought but rather that strength was to be sold into. Again, as we have said, in bear markets there are but three positions we are to take: Aggressively short; modestly short and neutral. But… and this is indeed an important but… the speech by China’s President Xi may be a game-changer of the first order and not to make mention of that at this point would be an error of even a greater order.
At the moment we are neutral of shares for we have no position, but we shall admit that the rally from nearly 2585 in the nearby S&P futures to nearly 2645-2655 we would have had our bearish interest for as we write all we’ve seen thus far is yet another “inside day” where the trading action thus far has been contained “inside” that of the day previous. This was precisely what we’d seen the day previous and as we said here yesterday, “Inside days” are almost always continuation patterns that resolve themselves in the direction that the market was travelling previously. But…and again here is one of those very important “Buts’… Xi has us remaining on the sidelines, refusing to take bearish action and actually considering doing precisely the opposite.
Meanwhile, adding to the confusion, Gartman says that as he was considering turning bullish, he actually went short earlier in the market…. just to have it rip in his face.
In our retirement account we made one small change: we explored the short side of the market on our own, re-establishing a very small short position via the derivatives market early in the day. This is a small position to test the market’s “temperature,” and until Mr. Xi’s speech it looked to have been a proper and fortunate one. Had Mr. Xi not given that speech almost certainly we would be officially recommending selling the market short and would be adding to our short derivatives position; however, considering Xi’s speech we’ll take no further action other than to very, very seriously consider covering at least a part of that trade.
You know what to do.