In retrospect, the bond rout which sent 10Y Treasury yields to the highest level since 2011 should have been obvious – after all just over a week ago, Dennis Gartman decided to go long “bonds and bond-link funds” in his retirement account, in addition to gold.

Alas, as so often happens, it didn’t turn out quite as expected, and as the world-renowned commodity guru writes in his note today, half of his bond holdings are now history”:

In our retirement account, we did take some action yesterday given the weakness in the US bond market following the surprisingly stout ADP report and we sold about half of our bond position right on the opening, and swapped that bond position for a position once again in the shares of the US largest producer of ball bearings… the ultimate stock of a company that produces “the things that if dropped on your foot shall hurt,” for what is more central to economic growth than ball bearings? We bought a correction and our risk is only to the lows of last week. We still retain other bond and/or bond like positions and we are still long of gold.

Perhaps that means that going forward the selling pressure on US Treasuries will be only half as big.  Sarcasm aside, for those algos who just need to know which way Gartman is leaning at any given moment, here are his latest market thoughts, which are – needless to say – a little confusing as on one hand he says that “a global bear market of some very real consequence is developing” and on the other “We are long of US shares via the S&P futures.”

STOCKS PRICES AROUND THE WORLD ARE VERY MARGINALLY WEAKER as our International Index has fallen a very modest 6 “points” or far less than 0.1% as 6 of the 9 markets that have been open in the past twenty-four hours have risen, but all of those six were higher by very marginal sums. The markets in Asia… and especially the market in Hong Kong…were weaker, with the latter falling well more than 1%.

In the end, this modest 6 “point” loss puts our Index down 181 points for the year-to-date, or -1.5% for the year; but as we’ve  been noting here on an all-too-regular-basis for the past several months, our index is now down a very material 881 “points” from its high made back in late January, or – 6.9%. Again, we tend to look upon 7% declines from interim peaks as evidence that a  bear market is extant just as we look to a 7% increase from an important interim low as evidence that the market has turned bullish in  the longer term. Given that only a few weeks ago our Index had fallen by well more than 7% from its peak and given that the markets are now in the process of revisiting that low, one cannot but think that a global bear market of some very real consequence is developing. 

We are long of US shares via the S&P futures and we are short of European shares via the EURO STOXX 50 futures and very fortunately since the inception of this trade late last week we’ve been materially profitable. Indeed, the only question facing us is when it is that we are to add to the position. As we said here yesterday, we shall wait for this trade to become materially extended in our favor and for the trade to then “suffer” its inevitable correction. It shall be into that correction that we shall add to the position and not a moment before then, barring surprises along the way.

Good luck.

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