Gartman Goes Short

For those curious just what prompted stocks to soar today, besides the now traditional and thoroughly unjustified "trade optimism" barrage of headlines, we present one possible explanation: Dennis Gartman is out with his latest investment recommendation to short the S&P. Her is his latest "hot take" on markets:

... we note that the CNN Fear & Greed Index finished yesterday…. Wednesday, October 9th… at 30, up 1 “point” from Tuesday’s closing level. There is now no question about it: we erred… and rather badly so… in holding steadfast to the thesis that no bearish action was to be taken until this index had made its way above 70 because it had made its way to 68 two weeks ago. 68 should be in anyone’s estimation rather obviously close to 70. Further, the fact that it’s turned lower and is now well below 40 has raised our bearish interest for the first time in quite some while.

At this point we again draw attention to the chart this page of the CNN Fear and Greed index noting that that the peaks since the autumn of ’17 have been progressively lower. This would seem to tell us that the internal and inherent strength of the decade-long bull market has waned and is waning. But we’ve not acted yet. We’ve not actually taken a bearish posture because we are constantly reminded of what “Old Turkey” told the young Jesse Livermore when asked why he’d chosen not to sell his stocks as a correction seemed quite reasonable, to which the wizened old investor replied, “Well, after all, this is a bull market.” But even great bull markets come to an end… eventually. Given that our International Index made its peak in late January of ’18, we have to begin to admit that we’ve actually been in a bear market since then and simply we’ve  collectively and individually not recognized that fact.

Finally, it was brought to our attention earlier this week and we’ve commented upon it this week twice already that executives… CEO’s, CFO’s and corporate board members… have been selling stock in their companies at the fastest pace of such selling in the past two decades. Insider selling is not quite as “telling” as is insider buying, but selling of this size and duration has our attention… and well it should.

And the actual recommendation:

As of Tuesday evening’s close we had gotten to what we refer to here as “net beta adjusted zero exposure,” or as close to zero as we were able; “zero” being neutral. It was our intent now to get just a bit “net beta adjusted short” by cutting back marginally on our long positions and by adding… also at the margin… to our derivative shorts. Yesterday we did the former; we cut back… marginally… on our long positions but we did not add to the short derivatives.

NEW RECOMMENDATION: The chaos of last evening shows us just how vulnerable equites [sic] are at this point and so we are sellers today of the December S&P and December EUR STOXX 50 with the former at or near to $2916 and with the latter at or near to 3456. We’ll “do” one unit of each and will risk 2% on each position and no more than that. If/when the December S&P falls below 2875, we’ll add to that trade and if/when the December EURO STOXX 50 falls below 3300 we’ll do the same.

This effectively assures that 2,974 on the S&P is in the bag. And finally, some bad news for gold bulls:

Regarding our gold position, following the PMI “news” early last week we bought a bit more gold. The monetary authorities of the industrialized world really haven’t any choice but to continue to err in favor of monetary expansion, all things being otherwise equal, and thus unless the very rules of monetary policy have been wholly rescinded that shall be bullish of gold. Mr. Powell’s comments on Tuesday only serve to underscore that notion.