After being “Only Very Slightly Net Long” heading into the latest market swoon, overnight Gartman flopped again, and may have doomed what seemed like another selloff (futures were down 0.5% at one point in the overnight session), with his latest forecast in which he says he would “not be at all surprised to see this selling cascade today and become very serious indeed.” Since that prediction, ES is up 0.6%.
Here is the highlight from latest note:
SHARE PRICES HAVE “GONE SOUTH” IN GLOBAL TERMS as seven of the ten markets comprising our International Index have fallen… three of which have fallen by more than 1%… as the news spread through the markets yesterday regarding the problems attendant to the Deutsche Bank. We are not privy to the goings-on in Germany at the bank and we are certain that there are myriad problems all of a sudden seemingly coming to a head that are causing the bank to be talked about in “Lehman”-like terms. The question is whether Merkel & Company shall come to the Bank’s aid and save it from failure, and although Ms. Merkel has said countless numbers of times that she has no intention of doing so, in the end she will. She shall have no choice. Germany… and by extension the whole of Europe, and buy even further extension… the industrialised world cannot abide the collapse of the Deutsche Bank. It will be bailed out. Other banks in Germany can and would be allowed to fail, but the Deutsche Bank cannot and will not be.
In the world of capital markets, perception is all-too-often reality; if the market “perceives” you as impaired, you are impaired and if the market “perceives” you as solvent, you are effectively insolvent… at least for the moment. This is the harsh reality of the market and as our old friend from 25 years, Mr. Barry Bausano, the Chairman of the Deutsche Bank’s hedge fund business said yesterday, even though the bank’s prime brokerage operation is very nicely profitable the bank still has “a perception issue.” Barry and others at the helm of the Bank’s various capital markets divisions have said that there have been no noticeable outflows of funds from the Bank, and given that that is so the Bank will likely weather the storm. Certainly we expect that that is true and at the moment we’ve no doubt but that that is indeed and in fact true. However, once again, in the capital markets, perception is all too often reality.
So, once again as the rumours swept through the capital markets yesterday mid-morning “risk happens fast.” Only a few hours before it appeared possible that the market here in the US would make new highs; instead, the veritable bottom fell out. Only a few hours before, the European markets were all moving pleasantly higher; instead, selling pressures erupted. By the day’s end, we’d seen “reversals” in the DJIA futures; in the NASDAQ futures; in the Russell 2000 and especially in the DAX and EUR 50 futures. We take this rather uncommonly large number of “reversals” very seriously, and given that this is the quarter’s end we’d not be at all surprised to see this selling cascade today and become very serious indeed. Risk does indeed happen fast, as our old friend,
Doug Kass, reminds everyone.
And just like that, the algos have been given the green light.
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