Is This Why Stocks Are Lower?

Tyler Durden's picture

A week ago, when the market opened red and rallied all day we asked whether the reason for the latest reversion was due to the most recent overnight note from everyone's favorite coincident momentum indicator, Dennis Gartman, who said that "later today we’ll be reducing our long positions modestly and/or increasing our derivatives positions also, to take us very, very close to market neutral, and indeed we may find ourselves erring even ever-so-slightly negatively of shares if the conditions warrant."

Today, despite the strongest Service ISM in 9 years, stocks appear unable to catch a bid. Like last week, we wonder if the reason is the latest philosophical flip-flop from the bearded CNBC contributor, to wit:

We tried not to equivocate too materially yesterday but we hoped we had made it clear that it was our intent to move off of the centre point of neutrality to something a bit more bullishly inclined. We remain long of aluminium, with what were and still are out-of-the-money calls written against our aluminium company’s shares and we hope to see those calls expire worthless as the main aluminium producer in the US makes its way quietly toward the next obvious strike price to the upside. We did, however, as noted, buy back a goodly portion of the fracking related master limited partnership that we sold mid-week last week as we turned neutral of equities generally, having bought some on Friday amidst the panic liquidation. This trade has proven to be rather worthwhile with the shares rising more than 5% yesterday.

 

We’ll err bullishly then, albeit not aggressively so. Rather, as we’ve been in the past, we are “pleasantly” bullish and look to add to our positions as the lows last week are tested and prove to hold.

Indicatively, this is a sample of how virtual money should be invested to generate virtual returns, as recommended by D-Gart.

  • Long of Seven Units of Gold/short of Two Units of the Yen and Five of the EUR
  • Long of Three Units of new crop Hard Red Winter wheat/and short of Three Units of New Crop Corn
  • Long of the four units of “dollars” and one Unit of Sterling/short of five units of the Yen
  • Short of One unit of WTI and One Unit of Brent crude

And so on.