Less than two weeks ago, Dennis Gartman had a sour message to subscribers of his Gartman Letter: "sell into strength" as "this is now a bear market", to wit.
[S]trength is to be sold into; weakness is only to be bought after the market has been sold. If one sells a thousand shares on strength, on weakness one might wish to buy back only half of that, with the intention of selling another thousand on any subsequent strength. This is now a bear market; trade then accordingly.
Well, as usual when it comes to the world-renowned commodity guru, everything has changed just two weeks later when market momentum reversed, and with the S&P back over 2,800. And considering how much conviction Gartman had to urge his paying customers to dump stocks on July 5, if he didn't like stocks 100 points lower, he should hate them now? Well, no. In fact, according to Gartman's latest letter, not only is it not a bear market any more, but readers should position for a breakout higher in US stocks because, drumroll, the recent action "has been nothing more than a massive consolidation phase in what is still a bull market." No really:
The chart of the Dow Industrials at the upper left of p.1 this morning strongly suggests that the past 6 ½ months has been nothing more than a massive consolidation phase in what is still a bull market, consolidating the gains earned over the course of the bullish run that began in early ’16 when the Dow traded down to 15,700, having corrected from just over 18,000 in early ’15.
The chart Gartman is referring to is the following:
So what happens if we get the expected breakout? Nothing short of a historic meltup, one which does not quite jive with the "bear market" predicted by Gartman 13 days earlier:
If these past 6 ½ months are indeed going to prove to have been a consolidation phase, then huge gains, perhaps sufficient to carry the Dow to 30,000+… as exaggerated and as stunning as that may sound… is technically possible.
Interestingly, one can make the same technical case for the Nikkei to have consolidated either side of 22,000 over the course of the past nine months as we have made for the Dow. One can make the case too for the DAX to have consolidated either side of 12,250 over the past full year, or for the Eur STOXX 50 to have consolidated either side of 3,450 for the past 15 months as we may be seeing in the Dow.
And his conclusion:
In other words, this is a global event that is taking place: a possible global consolidation that is now breaking out to the upside. Certainly, it is possible.
Gartman even has some trade recos:
we do not like to make official stock recommendations for SEC “reasons,” but we own VLO in our retirement account for the reasons out lined above and we are interested in owning ethanol producers as a surrogate for corn, and although we do not own any of the latter, but we are considering doing so as a pure “punt” for after all, PEIX is down from $24/share four years ago to $2.40/share as of last night’s close.