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Stocks tumbled yesterday after the FOMC minutes showed that many Fed officials wanted to reduce or end QE sooner than expected. The Dow tumbled 108 points, and today stocks and commodities are down again.
In his latest “Gartman Letter,” Dennis Gartman writes that he has made “material changes to [his] position across the board” because of the shift in “tectonic plates” in “all of the capital markets yesterday”. Here are some excerpts:
“When tectonic plates in the earth’s crust shift earthquakes happen and when the tectonic plants shift beneath our feet in the capital markets margin calls take place. The tectonic plates have shifted and attention… very careful and very substantive attention…
must be paid.
“Simply put, the game has changed and where we were playing a ‘game’ fuelled by the monetary authorities and fuelled by the urge on the part of participants to see and believe in rising ‘animal spirits’ as Lord Keynes referred to them we played bullishly of equities and of the EUR and of ‘risk assets’. Now, with the game changing, our tools have to change and so too our perspective.
“Where we were buyers of equities previously we must disdain them henceforth. Where we were sellers of Yen and US dollars we must buy them now. Where we had been long of gold in Yen terms, we must shift that and turn bullish of gold in EUR terms. Where we might have been ‘technically’ bullish of the EUR we must now be technically and fundamentally bearish of it. The game board has been flipped over; the game has changed… change with it or perish. We cannot be more blunt than that.”
Further down the note he writes that the stock market has ended its bull run and that both the indices and individual stocks reversed:
“We have been openly bullish of equities unerringly since late last year and became even more so on the first day of this year when the indices all ‘gapped’ higher on huge volume. We had no choice but to be bullish; the markets were powering higher and they had the fuel from the monetary authorities to do so.
“Now, however, that fuel is thought to be pushed a bit away; the “punch bowl” has been moved nearly out of reach and that alone would be sufficient to force us to change our bullish posture. But with the technical in the markets breaking down as badly as they have we’ve no choice but to exit any and all bullish constructed positions and rush to the sidelines.”
Gartman also exited all his stock positions in August 2012.