FYI | Jun 29 2010
By Rudi Filapek-Vandyck
It really is difficult to get excited about prospects for US equities and for industrial commodities, argues US-based market trader Dennis Gartman.
In yesterday's edition of his daily The Gartman Letter he points out the S&P500 is failing rather badly in getting back above its 200 day moving average. More disconcerting is that when the index managed to rise above this trendline, and stay above it for a handful of days in June, market volumes were tepid at best, recalls Gartman.
Even more disconcerting is the fact that once the index fell back below the trendline, overall volumes were rising.
Thus, summarises Gartman, “we are watching a market fail at an important moving average… one that we think defines the major trend… and we are watching a market that rallies on small volume and weakens on large”.
There's more to worry about. Gartman reports market technicians are highlighting the fact that the RIS (indicator for market strength) and MACD have not only both failed to make new highs, but both are failing in recent weeks at new, lower highs while having made newer and lower lows.
All in all, says Gartman, it's probably better to err “decidedly upon the bearish side of the ledger”, especially with Friday's non-farm payrolls release on the calendar, ahead of a long weekend in the US (4th of July).
Gartman would advise buying defensive, low beta, high dividend paying equities and is currently considering “being quietly net short of equities for a while”.
His position towards commodities is summarised in a chart showing all major commodity indices have fallen through trendlines in April and May. It will take months to repair the damage that has been done to these indices and to commodity markets in general, he predicts.
