After two days of correctly warning that funds and quants are precariously positioned, and are poised for a "massive" short squeeze as the market rips higher, Charlie McElligott's directional bet has found a new supporter: "world-renowned commodity guru" Dennis Gartman, who this morning notes that while stocks remain in a bear market and "internals" remain demonstrably bearish, expects that a furious rally of as much as 1000 Dow points is imminent, in short - a smart way to once again cover all bases.
First, here is bearish Gartman:
As we very much hope we’ve made clear in recent days, weeks and months, anything more than a 7% move to the downside is to us clear proof that we are in the midst of a bear market and at a bit more than -13% from the highs we’ve now nearly doubled that 7% “benchmark.” This, then, is indeed a bear market and we have absolutely no choice but to trade it as such, selling strength first and buying weakness only later and at much lower prices. We state then once again for the record… and we are beginning to lose count as to how many times we’ve actually said this… that this is a bear market in broad, global terms and as such one can have but one of three possible positions: very short of stocks; modestly short of stocks or, finally, neutral of them. We have said this numerous times in the course of the past several months and we are saying it yet again this morning.
In all then, the “internals” here in the US remain demonstrably bearish. The numbers do not lie. We shall again argue that the public has not even yet considered selling their stocks that they’ve accumulated over the past several years, and they’ve certainly not acted to do so. Indeed they are being told to take a long-term view and to sit tight… even to consider buying into this current weakness. This, sadly, is the same advice the public was given in early ’07 and into ’08 as the bear market then was in its early stages and long before true capitulation… and very, very aggressive action by the Federal Reserve Bank… stemmed the collapse. Again, we state for the record that bounces are still to be sold until further notice and on this we trust we are again very clear.
And the bullish one:
This then brings us to today and today the market here in the US shall rally and, the “thing” that those who are bullish of stocks here in the US can pin their hopes upon is that the CNN Fear & Greed Index is down to deeply “pessimistic” levels having closed last evening at 8... At 8, the level of “Fear” is egregious indeed and some bounce… some dead-cat-like bounce… is due and it is happening as we write.
As a result of this short covering and perhaps even a bit of new buying we can readily imagine the Dow trading 750-1000…and yes, we said 750-1000 points!.. or more points higher from its recent lows: or that the S&P could trade 200-250 points higher from its lows.
The problem for the long-term investors is that even with rallies as material as we suspect might readily happen the markets will fail well below their last interim highs and the bear market will still be wholly intact. This strength can be and must be sold into; but for now we can wait, remaining hard upon the sidelines until such time as the stock market’s cheerleaders are breathless with renewed enthusiasm, only to have their hopes dashed once again.
No wonder the market has no idea what to do next.