Just in case the bulls needed some cheering up, here is Dennis Gartman with the goods:
STOCK PRICES HAVE GONE EFFECTIVELY NOWHERE since yesterday as six of the ten markets comprising our International Index have fallen… with three of those six having fallen by more than 1%; the markets in Germany, in France and on the mainland in China… while four have risen, with one, the market in Brazil, having risen by more than 1%; indeed, Brazil’s market, having fallen quite precipitously in the past two weeks, bounced 2.3% higher! In the end, our Index has risen 1 “point” since yesterday, leaving stocks in global terms down 0.6% for the year-to-date, just as they were yesterday.
Further, stocks are now quite some distance from their collective highs made in late January… the 29th to be precise… when our Index traded to 12,857. In fact, just to be precise yet again, stocks in global terms as measured by our Index, are -6.0% from that high so this is more than a mere, modest, gentle correction. This is has become something material in nature and something of very real consequence. In fact, we have always considered a movement of 7% to be the defining percentage for a bull or a bear market; that is, when prices have moved 7% above a bear market low we consider the bear market to have ended and a bull market to have begun; concomitantly, when a bull market has fallen 7% from its highs, the bull market has ended and the bear’s begun. We are almost there in that latter case.
So a 7% drop is the start of a bear market, and not 20%? One learns something new every day.
Anyway, here is Gartman's conclusion:
We suggest that caution is thus in order and that defense rather the offense is the proper course of action. That does not mean that one should be short of equities, although we’ll not argue too vehemently with those who do wish to err in that direction, but it does indeed mean that new purchases of equities at this level… the new commitment of funds to the long side… would seem to be ill-advised. P/e multiples are extended; the monetary authorities here in the US are erring hawkishly; the political environs are confused and confusing and the Trump Administration is on a tirade of tariffs and trade protection, so yes, defense is the better offense.
As we write, and as Asian shares have bounced from their lows, stock index futures here in the US are rebounding with the Dow futures trading 100+ points higher. However, the technicians among us will “see” this bounce as an “inside” day where the day’s range thus far is “inside” that of the previous day. “Inside” days are almost always continuation patterns; that is, they are correction days and almost always resolve themselves with a continuation of what had been happening previously. In this case, since stock prices were weakening, this “inside” day will resolve itself later this week by breaking to newer lows… may be!
As a reminder, one week ago Gartman was bullsih. Since then the Dow has wiped out all of its gains for 2018. And now, the path to new ATH is finally clear.