The recent pullback for markets, driven by momentum-stocks in the technology and biotech space, has just scared one big bull out of the markets.
Dennis Gartman, who edits the Gartman Letter, told CNBC in an interview late Monday he recently ‘got scared’ and moved his equity exposure to near zero from 100%. He said he’s sticking with gold and cash to ride out the “long-awaited and much-needed correction.”
Gartman, who earlier this month was still holding his bullish stock stance, basically got freaked out by 15 minutes on the markets Friday. In that short space of time, he said the market turned like he’d never seen it turn before. Friday was quite a day, with heavy selling of biotech and Internet stocks, pushing the Nasdaq Composite COMP +0.82% to its worst day in two months. The S&P 500 SPX +0.38% and Dow industrials DJIA +0.06% also dropped 1.3% and 1%, respectively, that day.
“Friday morning I came back from the gym, and I was very comfortable: I owned aluminum, I owned coal, I owned money-center banks. Then between 11 a.m. and 11:15 a.m. it was as if they flipped the switch. Everything changed: stocks changed, bonds changed, gold changed, currency changed ”” the whole world switched,” recalled Gartman.
Gartman said he won’t be buying stocks again until they get much cheaper.
He said Friday’s action was worth noting because it was a so-called outside reversal day, when both the high and the low price for the day, for a stock or index, exceeds those levels on the previous day. If there is downside follow-through, as Barron’s explained on Monday, it can also signal a market top. The Nasdaq logged a 1.2% drop on Monday, and a 4.6% fall over three sessions, to mark the worst three-day loss since November 2011.
Reversal days are common ”” they happen, said Gartman. However, reversal weeks are rare, and reversal months are rarer still. “It’s really, really important … we don’t get outside reversal months, where you make a new high and close below the previous month.”
Over on Twitter, there was plenty of eye-rolling going on, given that on April 1, Gartman was touting a bullish stance on stocks to CNBC.
Gartman may be missing out on a bounce, though, according to some. Milton Ezrati, market strategist and economist at Lord Abbett, told CNBC he expects earnings won’t disappoint and will “show people that the world’s not going to come to an end, just because names in social media are blowng up.”