Gloom and Doom Ahead, Says Gartman
Famed newsletter writer and doomsday prognosticator Dennis Gartman is back in the media spotlight, this time with a bearish call on equities. In his dire warning, Gartman draws special attention to U.S.-based stocks, which, he says are teetering on the verge of decline.
“We find ourselves turning a bit more bearish of [sic] equities in global terms and quite a good deal more bearish of equities here in the US [sic], for a number of reasons,” he said. (Source: “Gartman: ‘We Find Ourselves Turning A Good Deal More Bearish On US Equities’,” Zerohedge, October 17, 2016.)
“Firstly, we continue to look upon the peak in margin usage which was forged back in mid-’15 as evidence that a peak has been made, for margin usage tends to ‘top out’ a year or more ahead of the equity market itself,” he continued.
Dennis Gartman also pointed out that investors have started to dole out outsize punishments for relatively small earnings misses. He views this as a bellwether of things to come, specifically citing the routing of Alcoa Inc (NYSE:AA) stock as a precursor to increased downside sensitivity. The company lost 15% of its market capitalization following a relatively small earnings miss.
His final reason was, by his own admission, a little provincial. Gartman believes the direction of market movements from morning to afternoon on Friday bode ill for equities. He thinks those movements hold insight as to how investors are feeling about stocks.
“This is perhaps a bit ‘parochial’ in scope, but the close on Friday was disturbingly ill, for after having opened sharply higher in the morning, the close hard upon the day’s lows,” he said. “This is not how healthy markets trade; this is, however, how ill markets turn for the worse.”
Gartman also took care to address the Fear & Greed Index. Some critics would have responded by saying the data showed improving investor sentiment, but Gartman believes the drop is right around the corner. Here’s what he had to say. “Also we note that the CNN Fear & Greed Index has fallen modestly, but what is most important is that the Index, having ‘consolidated’ over the course of the past month and one half between 50-60 has broken to the downside,” he said. “Before this bearish run has run its course we shall see this Fear & Greed Index make its way down below 20, signaling a severely over-sold market at that point:”