It had been a bad week for Dennis Gartman who just yesterday admitted that Wednesday “was our worst day of the year thus far, as that which we were long of fell and that which we were short of closed unchanged. Long ago we learned that when things go awry and do so as “majestically” as they did yesterday it is best to simplify, simplify and to simplify again. Getting smaller; getting less involved; curtailing positions in numbers and sizes is the only proper way to respond and so we did exactly that. We exited everything other than our positions in GEUR, GYEN and our short derivatives position… and even that we cut back upon to leave ourselves net short of equities but only rather modestly so.”
Yesterday was a disaster which we wish to put behind us, and by getting smaller and less widely involved we are in the process of doing so. We are still profitable for the year-to-date, but only marginally so. Defense is the better offense for the moment. There will be better times ahead if we stick by our rules of trading. Of that we are certain.
There has been no material change in Gartman’s positions today, who notes that “because it is a bear market we are to trade accordingly.”
Fair enough, however what may come as bad news for shorts is that as Gartman writes, “we are net short of equities here in our account, although we are not materially so.” As he previewed yesterday, “we’ve only a few positions on: we are long of gold in EUR and Yen terms via GEUR and GYEN; we are long of a small bullish derivative of gold in US dollar terms and we are “short” of the market via derivatives positions.”
And while Gartman would be happy to hold to a “net short” position, there are “only two things that bother us even modestly.”
Firstly, that when the support levels in the various indices here in the US were taken out to the downside yesterday morning they did not stay firmly and definitively “given” with the market bouncing from those lows late in the session and continuing higher this morning.
Secondly, the strength in the Japanese stock market, predicated upon the comments from Mr. Kuroda that he intended to what he must to achieve the 2% inflation target set long ago and that Japan’s monetary policies shall be set according solely to Japan’s needs, without material concern for the effects upon other G7 nations. Those comments helped to strengthen the Nikkei, and well they should, giving support to stock prices in Asia and putting a bid into US stock index futures overnight.
The algos have surely sensed this lack of faith, and as a result futures are now approaching overnight highs, with the probability rising by the minute of another major breakout pushing stocks by the usual “stop-hunted” 1% higher on no news, just to “fade Gartman”, a term that has spawned a cottage industry of anti-folloers.
Incidentally, while DG did not update on his “retirement account P&L” yesterday he did so this morning:
For the year-to-date, stocks in international terms are down 3.8% while here in the US they are down by the very barest of margins: -0.2%. We here at TGL are, in our retirement account, up a scant 2.2% for the year-to-date, and having been up by as much as 11.2% earlier this month but having suffered the single worst day of the trading year two days ago we’ve gone out of our way to scale down our positions; have eliminated some… if not most… of our positions and have gotten a good deal smaller. This is the proper response to what happened to our positions mid-week. As the Episcopalian Book of Common Prayer suggests, it is “meet and right so to do.”
But what does the book of Fed Book of HFT Prayer say?
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