One of the “Talking Heads” regularly trotted out by CNBC to share his wisdom is Dennis Gartman. He usually makes some sort of esoteric, useless recommendation like “I’m not buying gold in Dollars but am buying it in [Australian Dollars, Indian Rupee, Thai Baht, Japanese Yen or some other currency which is equally meaningless to his US audience but meant to make him sound like a true authority. Instead, I just chuckle at his pomposity.
In any event, he’s been taking a different tack recently calling for a market decline. One June 4, Gartman announced the beginning of a new Bear Market:
“The weak U.S. jobs report for May and a deterioration in the U.S. economy will lead the U.S. Federal Reserve to announce another round of quantitative easing as early as this month….could come as early as the Fed’s next meeting on June 19-20, or at the following meeting on July 31-Aug. 1. The central bank will want to ease as “far ahead” of the U.S. presidential election in November as possible, so it doesn’t come off as being “politically amenable” to the current administration….”I’d much rather be optimistic than pessimistic, but I think the European governments have forced me into being somewhat pessimistic,….But will [QE3] have a bullish effect on the stock market? Probably not. The fact that they need to do it alone is very disturbing.”
On June 4, the S&P 500 was 1278.18, or 10.35% lower than today’s close. Not having changed his mind (nor learned his lesson), Gartman went back on the CNBC air to reiterate his nervousness:
“We saw divergences between the transports and the Dow Industrials — old-style, Dow-type theory things — a lot of people having been bullish. Now I’m just neutral. I’m flat, and I’m nervous.”
So what’s causing all this angst for those who are supposed to be cool and collected? I’d say it’s their superimposing what they see in the global macro-economic environment onto the market’s narrow range. A friend of mine used to say that “if the only tool you have is a hammer then everything looks like a nail”. In a similar paraphrasing vein, “if you’re basically a pessimist then every trading range looks like a reversal top.”
The market must be offering a lot of fodder for pessimist these days because, if you are so inclined, you can envision a “double-top” emerging from the huge trading range the market’s been stuck in since March:
Yes, if I squint hard enough I can can perhaps begin seeing the possibility of an emerging double-top. But the market is far from clearly completing the left shoulder. The May trough is the single pivot “defining” the lower boundary of the horizontal channel (two, if you consider the pivot point at the November 2011 peak to be a part of this emerging pattern) and that is a long way from a fully formed congestion pattern.
I don’t deny that there may be a correction around the corner but it’s a long way to a fully formed reversal top. I’m also cautious but not so worried as to be ready to start dismantling my portfolio of excellent stocks. One of the reasons I’m not ready yet to see the market’s reversal top is that, at the individual stock level, I see too on my watchlist as if they’re ready to finally break above key resistance levels. One typical example of many is SRCL, one a leading momentum stock: