Is Gartman Right About Shorting the Dow and Gold?

"Short Of" Garty?

"Thinking well is wise; planning well, wiser; doing well wisest and best of all." -Persian Proverb

Of course I am not “short of” the man. As all Early Look titles go, we have to have some fun at these un-Godly hours of the macro morning. Dennis Gartman is one of the great grinders of the early morning gridiron. The investment community is a better place with him in it.

This does not mean, however, that I need to subscribe to the panting dog nodding that CNBC’s Fast Money’s producer must force his “Traders” to look into the eye of the camera with when listening to the Gartman gospel. Someone has to hold the members of this circus act accountable. The American Financial system is being You Tubed by the world, daily, and it’s just too embarrassing to know that The Client (China) thinks that this is what US investors do.

So Garty, let's slap the ole red, white and blue accountability pants on and take a walk down the path of a few positions that you are currently “short of”, The Dow and Gold:

1. I have also been “bearish of” the Dow via the DIA etf, but covered my position on Wednesday’s weakness

2. I am long Gold via the GLD etf, and remain “bullish of” it

Not to be mistaken for that one Fast Money Trader who pronounces the world’s most relevant growth economy with an “R” at the end of it (“China-r”), we must give the proper attribution to the “bearish of” or “bullish of” lingo – this is Garty’s - and he remains The Man for beating his own path with it.

Let’s get back to “doing well” as it’s the “wisest and best of all” positions. Being the capitalist that he is, we want to make sure Garty has every opportunity to get these positions right.

1. The Dow Jones Industrial Index

- Garty is right, the Dow is trading below the 200 day – but that’s far from a unique short thesis; this is not a “truly ominous” chart to be “short of”

- Immediate term TRADE support = 8153

- Intermediate term TREND support = 7782

2. Gold

- Garty must know that he is getting this one wrong (after all, that almighty 200 day moving average that he is “short of” with the Dow = gold $856/oz)

- Immediate term TRADE support = $897/oz

- Gold is about to lock in its second consecutive week of positive price momentum, and it’s threatening to break out again to the upside.

Now don’t get me wrong here, I don’t think Gold busts out to higher highs, yet… nor do I want to be “long of” the Dow. As prices change, my view on all things do as well. I am not wed to any position other than my marriage to Laura. I was “short of” Fast Money’s “long gold, short America” call in early March, remember. Garty, for accountability purposes, have someone forward you my Early Look of 2/19 titled “Long America, Short Gold” – I get the short case, but only at a price.

One way to really perform in markets is to understand how the other players on the ice play. If you can proactively predict their patterns of behavior (200 day moving averages for instance), you can always put yourself in a position to trade ahead of them. This isn’t a complicated strategy. Remember, “Thinking well is wise; planning well, wiser…”

Garty, like you, I’m in it to win it here and I want to see you keep winning man. If the Dow is down, at a bare minimum, just cover your short. As for being “short of” gold, well, I know that you know that I’m right on this, so… cheers to changing as the facts do.

I have downside support for the SP500 at 881 and upside resistance at 931. Buy low, sell high, capitalize on consensus, and trade the range.

Comments

[Pcatlow:]

Gold leads to a trail of tears. Trying to call direction on this commodity is futile.

May 17 08:18 AM

[ECONOMICS 101:]

Johnathan Vrozos JV also disagrees with Dennis Gartman on his position on Gold. It is confusing how he can be short when The Fed is printing Trillions of dollars almost daily.
By Johnathan Vrozos JV
johnathanvrozos.com
johnathanvrozos.ca

May 17 08:21 AM

[lorddarley:]

Asset prices were high because of an extraordinary "velocity" of money. All of this printed money is replacing high hopes, and is geared toward restoring the make-believe asset values of the last 10 years.

We have not even begun to experience the deflation which will be cause by state, local, and foreign country defaults on government debt. Commercial real estate, which has lost its key tenants (the financial industry and those who service it) is not talked about in the official circle of optimists, but the square foot asking price (necessary to service mortgage debt) is totally unrealistic.

Wages, in real terms, are going down, and anyone who mistakes government job growth for real job growth is smoking good stuff.

Someday, there will be inflation again, but even the mighty Fed cannot replace the asset values which were artificially inflated by an unprecedented binge of borrowing and speculation.

I keep stock of the gold miners (not the hard stuff) for diversification. There is really no long asset which is a good investment at this point except for high yielding utilities. The trend is down, and investments should be in instruments which will benefit from the trend.

May 17 09:09 AM

[H. T. Love:]

Just this A.M. "Tyler Durden" (a.k.a. Zero Hedge) posted this on seeking alpha.

seekingalpha.com/artic...

If this thesis is correct, then what?

HardToLove

May 17 10:04 AM

[old fogey:]

Someone can not read, either Keith McCullough or me. Gartman said gold is in a long term uptrend, but very expensive as compared to grains; hence the statement "long grains, short gold". That is my recollection of "Garty". Keith is out of context or incomplete in his "short gold" comment. Maybe he should read Gartman every day?

May 17 11:37 AM

[texpat:]

"Being the capitalist that he is, we want to make sure Garty has every opportunity to get these positions right."

I wouldn't call Gartman a capitalist. Every time I've heard him say something positive about gold, he has added a reminder that he's not a gold bug and that he dislikes them. A capitalist, in the proper free-market sense, wouldn't hold such a view, let alone trot it out with such regularity. Think, for example, of Greenspan before he sold out.

Gartman is establishment, which is to say corporatist. He seems to look for reasons not to like gold, even in the face of so many compelling arguments in its favor. In his defense, he seems to do a lot of short-term trading, so I can see him going short when gold is overbought. Nonetheless, this belies an understanding of gold's role as insurance.

May 17 12:16 PM

[gordon:]

Gartman is another Fast Money CON-ARTIST. I look forward to the day he is in jail for pumping his book on public airwaves.

May 17 12:28 PM

[RiskReturnO...:]

Everything is relative, especially in the post credit tsunami environment. Comments like long X, short Y asset class are interesting, but such always be put in context of relative performance (alpha and beta) vs. another asset class.

"Short Gold" thesis means Gold (GLD) may be overpriced, but relative to what? If US dollar, then long UUP to hedge. If Oil, then long USO. If Euro, then long FXE. If Grains, then long DBA. If Base Metals, then long DBB.

Nothing is "free" in this world anymore. If Gold does drop, something else will go up. Treasuries? US dollar? SDS (short SPY)?

I thought the whole point of "Seeking Alpha" was to share insights on asset classes that generate "alpha" while minimizing "beta." Let's all stick to comments that help investors manage these treacherous markets with un-correlated assets that support underlying economic trends and market thesis.

May 17 12:34 PM

[specguy:]

McCullough and others who write like him (the cutesy, insider patois that is incomprehensible even to traders who know the lingo) should focus on delivering thoughtful, well-written simple prose that is carefully edited so that its meaning is clear. We readers don't want to work at understanding meaning. IOW, take a position and state it clearly, then defend it in your argumentation. Obfuscation is for those who aren't sure of themselves.

specguy

May 17 12:48 PM

[specguy:]

McCullough and others who write like him (the cutesy, insider patois that is incomprehensible even to traders who know the lingo) should focus on delivering thoughtful, well-written simple prose that is carefully edited so that its meaning is clear. We readers don't want to work at understanding meaning. IOW, take a position and state it clearly, then defend it in your argumentation. Obfuscation is for those who aren't sure of themselves.

May 17 01:05 PM

[TraderRic:]

Extremely unreadable and hard to follow article. When I heard Gartman say he was short gold as a hedge, I was surprised. In the past he was a little late, but not completely wrong. Time will tell...

May 17 03:07 PM

[curious cat:]

when i'm short of gold, i usually buy some more. lol

May 17 11:08 PM

[one eye:]

The GLD Chart both Daily and weekly, continue to form what appears to be a H&S bottom which could send it above $1,000 within the Next 6 weeks.

I'm not about to go against it. I may sit on the sidelines until it gets resolved but Go Short, no way.

May 18 01:27 AM

[Did U Think...:]

Good post. The creation of debt (via the extension of credit and the acceptance of debt) is exactly analogous to the naked shorting of the dollar. It gives buying power to those who should rightfully have none because credit <> money even though they spend the same just like counterfeit money or FTD shorting are not real money and real shares respectively even though they are treated the same by an unknowing market place.

Thus it stands to reason that debt destruction, through the process of default, is a short squeeze on the naked shorters. This is the root cause of deflation. Yes, the velocity of money was also a cause and you measure it by the savings rate going from zero to 4% recently. People no longer spend every dime they earn. But that cannot be compared to the excessive credit based leverage than banks were allowed to employ courtesy of Alan Fvcking Greenspan whose head should be posted on a stick for all to see. It is the debt destruction that is causing deflation far more than reduction in the velocity of money.



On May 17 09:09 AM lorddarley wrote:

> Asset prices were high because of an extraordinary "velocity" of
> money. All of this printed money is replacing high hopes, and is
> geared toward restoring the make-believe asset values of the last
> 10 years.
>
> We have not even begun to experience the deflation which will be
> cause by state, local, and foreign country defaults on government
> debt. Commercial real estate, which has lost its key tenants (the
> financial industry and those who service it) is not talked about
> in the official circle of optimists, but the square foot asking price
> (necessary to service mortgage debt) is totally unrealistic.
>
> Wages, in real terms, are going down, and anyone who mistakes government
> job growth for real job growth is smoking good stuff.
>
> Someday, there will be inflation again, but even the mighty Fed cannot
> replace the asset values which were artificially inflated by an unprecedented
> binge of borrowing and speculation.
>
> I keep stock of the gold miners (not the hard stuff) for diversification.
> There is really no long asset which is a good investment at this
> point except for high yielding utilities. The trend is down, and
> investments should be in instruments which will benefit from the
> trend.
>
>
>

May 18 03:33 AM

[notagoldbug:]

gartman is long agr/short gold..stay infromed rookie

May 18 11:38 AM

[Maxe Paul:]

Short gold and the S&P is the logical trade to be in when this rally fizzes out. I mean ask your self this question,"where is the dumb money ATM"?.................... Long S&P and long gold.

The question here should be is he early on this trade?

May 19 07:00 AM