Dennis Gartman Signs Onto Equity is Dead Money Thesis ~ The Risk Averse Alert

Monday, February 08, 2010

Dennis Gartman Signs Onto Equity is Dead Money Thesis

A most excellent Word on the Street tonight. Dennis Gartman sounds alarmed ... and I think he is on the right track. The bearish case Gartman makes appears to impress even Tim Seymour.

Now, that's the kind of thing you'd expect when there's risk of an avalanche. There may be many more long-term bulls than bears here, but far, far fewer are, in fact, stupid with their money. To this group sell is not a dirty, four-letter word. And now, with objective reason to be convinced sell is, in fact, the right thing to do, what might the smart money manager — though an unrequited bull — be left to do but add to negative momentum?


Fading momentum of NYSE advancing versus declining issues is backdrop to a market susceptible to selling. Then, too, we find momentum locked down in the negative half of its range. Conditions in the realm of participation presently appear weak ... and at risk of grower weaker still.

Similarity here to early-July makes this a good time to recall last week's Variations on a Corrective Theme. In other words, this time is likely to be different, and this in keeping with the Elliott Wave Principle's "rule of alternation."

Then, too, we see another instance of "disguised weakness" mentioned Friday. Whereas October's advance-decline momentum bottom exceeded June-July's worst (which, itself, exceeded May's worst), not so the present fade. (Maybe the better term here is "restrained weakness," then?)


Same story here, and telling confirmation of a bearish outlook in whose thesis a lack of animal spirits is claimed. Late-October's NASDAQ advance-decline momentum break below its March '09 low offers substantiation.


The "view at the precipice" noted last week has become a trip over the edge on the NYSE...


...Yet not so on NASDAQ.

This disparity reminds me of the July-August 2008 period, when NYSE was flat on its back, after having fallen to a new low for the year, and NASDAQ was flying, making back much of its losses from May 2008 top. There's the flavor of this disparity in NASDAQ's momentarily better underlying condition, I mean.

I bring this up after last week suggesting NASDAQ's seemingly better technical condition was reason to think the market might find support here.

Yet, now I wonder... Might not the present technical disparity, NASDAQ vs. NYSE, instead be seen but another manifestation of "disguised weakness?"

Long technically lagging, NASDAQ's sudden maintenance of better underlying technical strength (relative to NYSE) rather appears a symptom of complacency ... which is precisely what you would expect prior to the lug nuts coming off the market ... much like happened in 2008.


Today's light volume coinciding with a downside reversal is foreboding. This morning's price "strength" could not sustain relatively minuscule selling this afternoon? This seems to substantiate the suggestion I made Friday, saying the greater bulk of losses delivered thus far might already have been recaptured.

So, as it stands I am still looking for a bottom and a bounce. Today's action but lends weight to the possibility that, the third wave down from top has begun.

Fast Money
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