Dennis Gartman: "The Melt Up Has Begun: It Will Stop When It Stops And Not A Moment Before"

Two trading days after Dennis Gartman said he was short the market, on Monday morning the commodity expert, looking at the overnight action which has pushed S&P future to new all time highs, is now warning that the "melt-up" has begun in earnest as "illogic reigns", and "it will stop when it stops and not a moment before."

To wit:

STOCKS AROUND THE WORLD CONTINUE TO ADVANCE with nine of the ten markets comprising our International Index having risen since we marked them on Friday. The trend remains upward and although nearly ever method we know of for measuring market sentiment is preposterously over-extended to the upside, and although nearly every method we know of to measure relative value is equally over-extended to the upside, the great game of investment musical chairs continues. The “music” of monetary expansionism continues in Japan and Europe, so clearly that helps even as the policies incumbent in quantitative easing here in the US are farther and farther behind us.


The CNN Fear & Greed Index is this morning at 69 and is swiftly approaching “greed” territory once again and purchases of equities at these levels is historically very illadvised for within weeks… or at the most a few months… those purchases will be proven to have been undertaken at extended, and very high prices. But as happened in the Bubble of near the turn of this century, prices were egregiously, preposterously, stupendously, stupidly over-extended to the upside and then continued to become even more egregiously, preposterously, stupendously and stupidly over-extended for months and months and months. As our old friend, and mentor, Dr. A. Gary Shilling taught us, “The market can remain illogical far longer than you or I can remain solvent.”


Illogic reigns; the “Melt Up” has begun in earnest and it will stop when it stops and not a moment before.


To get the numbers out of the way, for the year-to-date stocks around the world as measured by our International Index are +3.8% while stocks here in the US, as measured by the S&P are +3.4%. The global leader… at least as far as our Index is concerned… continues to be Brazil, which led to the upside last year and which for the year-to-date is up a stunning 11.0%.


Also, once again, amidst the euphoria of the moment, it is worth remembering that stocks in global terms are still well below their highs made in May of ’15 when our International Index traded to 11,185. It does seem that that “peak” wants to be tested at the very least:

Gartman also reports that he is closing out his WTI/Brent pair trade at a loss:

We have been long of WTI crude/short of Brent crude fearing the imposition of a border tax that would have sent WTI to a material premium over Brent. Now, however, with a 30-40 cent loss on the trade and with the “tide” shifting, it seems wise to admit that our worst fears shall not come to fruition and that exiting the trade is the wiser course of action. As Lord Keyes said, “When the facts change, I change” and in this instance the facts seem to have changed.

Finally, Gartman then notes that he actually manages a "few millions" in his retirement account, on which he is somehow up 5.2% YTD.

In our retirement fund here at TGL… and we’ve a few millions in the fund so it is not an inconsiderable sum and certainly it is meaningful to us… we are long of the shares of the largest steel producing company here in the US; we are long of gold in EUR and Yen denominated terms (having exited our position in gold/US$ late last week, a position established in the shares of the largest gold mining company in North America rather than in GLD or one of the other bullion ETFs.) and we are long of soybeans via the ETF, SOYB. As of Friday’s close we are up 5.2% for the year-to-date and we are grateful for reasonably well defined trends; for taking small losses and for simply “Doing more of that which is working and less of that which is not.”

In short, the momentum shall be chased.