In a world in which the Fed has never been more “uncertain” few “solid” things remain: fading Gartman is still one of them.
Yesterday morning we noted that in his latest overnight newsletter Gartman said that he was “adding to shorts” which perhaps was the best signal that stocks would close at session highs, well in the green.
Gartman adding shorts
— zerohedge (@zerohedge) July 6, 2016
So to anyone who is looking at futures modestly in the red today and expecting some modest profit taking, Gartman’s latest thoughts may be sufficient grounds to reevaluate. Speaking to CNBC overnight, Gartman said that the Fed’s indecision over rate hikes had caused equities to become overvalued.
“I find it very difficult to be anything other than modestly bearish. I trade only from my own account and I am modestly short of equities generally and I think that’s the proper place to be. It’s a little scary to be bullish at these prices when it’s the Fed and monetary authorities who are sponsoring share prices (going) higher – it can’t last for very long.“
Alternatively, it can, although in this latest version of the Gartman flip-flop one would need to be weaponized to get Dennis to buy: “If you have to buy, the only place to be a buyer is the U.S. but you’d have to hold a gun to my head to be an aggressive buyer. I’m quietly, modestly net short and I feel reasonably comfortable being that way.“
Coming from the man who said he would be dead when oil rose above $44, this threat may lack some… credibility.
What else did Gartman say? First he opined on the Fed minutes:
“There’s little to be drawn from the minutes. I think the FOMC used the referendum (on the U.K. leaving the EU) as a reason to do nothing. They would prefer doing nothing and they will probably do nothing for a long period of time. ‘Lower for longer’ is probably the way to consider what the Fed is going to do for quite some long period going forward.”
Naturally, stocks rebounded following the publication of the minutes, the opposite of what Gartman had expected.
“There is a lack of resolve on the part of the economy here in the U.S. We’re moving forward at a very tepid rate and I think we’re stuck here at these low levels of Fed funds for a long period of time, certainly until the end of this year and perhaps into the middle of next year.”
This may be the best signal that Gundlach is indeed right and that a selloff in rates is imminent.
Finally, Gartman on tomorrow’s NFP: “It will again give the Fed a reason to do nothing. Will it be reason for them to tighten monetary policy? No. Will it be any reason to ease monetary policy? No. They’ll be happy to sit upon their hands and say ‘thank God’.”
To summarize: the Fed, which will do nothing, and in doing so will permit the ongoing levitation in stocks is sufficient grounds for Gartman to be “modestly bearish.” Expect another ramp higher.
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