Over the long-weekend, we reported that just as the S&P was surging last Thursday to close the week in a euphoric mood, Dennis Gartman – who just two weeks ago made a “watershed call” that the market has hit a multi-year top, announced that he was covering his short, suggesting he has no faith in his own calls (or credibility and/or reputation).
We are still convinced that a bear market of some long-term consequence is upon us, and therefore we are to have one of three possible positions: Very short; modestly short and neutral. We cannot be long of shares for as stated we are convinced that the highs of late January are inviolate, but perhaps for a short while as the usual vicious, short term short covering rally obtains it might be better to be demonstrably less short, covering in all of that which we are short of and hiving off to the sidelines for a short while.
Everyone knows what happened next: the market crashed, with the S&P suffering the worst start to the 2nd quarter since the Great Depression.
— Tim Knight (@SlopeOfHope) April 2, 2018
Fast forward to today, when we – and everyone else – were curious if Gartman is once again shorting, a move which would be terrible news to the bears and would certainly explain the rebound this morning. Here’s what Gartman had to say:
Something very real and very serious is taking place in the global equity market and we believe that it is simply that the monetary authorities are no longer supplying reserves to the system in the same hurried, aggressive manner they had been doing so in the course of the past several years while the demand for plant/equipment and labor continues to rise. Again, risking obvious redundancy, stocks rise well in anticipation of economic growth out of recessions once the monetary authorities become aggressively expansionary in their monetary policies and stocks fall well in advance of economic weakness as those same monetary authorities become less expansionary while the demand for capital increases. Stocks discount the future, both positively in the depths of recession, and negatively at the peaks. It has always been such; it shall always be such.
Taking ourselves to task then, we moved to the sidelines yesterday morning, covering our net short position far, far too early for clearly in retrospect we should have remained short. Let’s be quite clear: we are still very bearish of stocks but as we said here yesterday and almost certainly as we shall say again many, many times over the coming months and perhaps years, there are but three positions one may have in bear market: aggressively short; modestly short and neutral. That’s it; all other positions are to be considered anathema. During the great bull market that ended January 19th, we said effectively the same thing but in direct opposition: that is, in bull markets there are only three positions one may have: aggressively long; modestly long or neutral. If we are guided… and if we remain guided… by those principals we shall be well served. But were we wrong to cover our short position yesterday? Again, in retrospect, yes… of course.
Unfortunately, it appears that not even Gartman is willing to reveal any more if he is once again outright short…
Until yesterday we were rather aggressively short of equities in that we were net short of them in and of themselves and we were short of them vs. a long position in commodities. We have retained the latter position, having exited the former, and as noted above we were clearly wrong in taking any action at all yesterday. We have no choice then but to use rallies into which to sell and of that much we are certain. Given the Dow Industrials have risen nearly 400 from their lows in the “evening” trading session, and given that the S&P futures had risen nearly 35 “big figures” during the same period, and given that the NASDAQ futures has risen nearly 100 “big figures” during that same interval, the market has gone… in the very short term… from being egregiously over-sold to rather aggressively overbought. We’ve perhaps just seen the bounce!:
… although judging by the market this morning, the algos are clearly convinced that the “world-renowned commodity guru” is once again short.