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Dennis Gartman: Heed Outside Reversal in Gold

Thursday, 24 Mar 2011 | 6:34 PM ET

Despite the fits and starts in so many areas of the market, the metals have remained red hot.

Silver has gained more than 40% since late January and this week touched 31-year highs.

But it's gold that's landed front and center on Fast Money's trader radar after the precious metal made a somewhat disconcerting move.

On Thursday, gold snapped a six-session winning streak despite a slew of catalysts that should have generated a safe haven bid such as the financial woes in Europe and violence in the Mideast.

In fact, investors who follow technical analysis say the action was downright bearish. ”We had an outside reversal day,” explains strategic investors Dennis Gartman.

(A bearish “outside reversal day occurs when the chart hits a new high relative to the previous day, hits a new low relative to the previous day and closes lower than the previous day,” according the website Equity Clock.

And whenever Gartman sees this kind of chart action he takes notice. "I pay heed to reversal days," he says in a live interview on CNBC's Fast Money.

Gartman goes on to tell the desk that gold had been looking 'sporty' and that this 'outside reversal' could be a signal that gold has reached a turning point. In fact, Gartman expects weakness to continue. ”We could see gold fall $25-$30,” he says.

However, Gartman considers that kind of decline net positive. "That decline would make the market healthy again."

Gartman: Central Banks Boosting Commodities?
Reserves injected by the Bank of Japan and the European Central Bank are going to gold and equities, rather than being used for timber, steel and copper down the road. Dennis Gartman, The Gartman Letter, explains why it's happening.

Long-term Gartman remains bullish with the big trend in the chart going from the lower left to the upper right.

And he sees a big fundamental reason to stay bullish. Largely Gartman expects some major buyers to remain in the market for quite some time.

”Central banks around the world are doing what they can to diversify away from dollars and euros,” he explains. “They’re going to the 3rd most important currency in the world – that’s gold.”




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Trader disclosure: On March 24, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Guy Adami is Long (AGU); Guy Adami is Long (MSFT); Guy Adami is Long (C); Guy Adami is Long (INTC); Guy Adami is Long (NUE); Guy Adami is Long (GS); Guy Adami is Long (BTU); Steve Cortes is Long (TM)p; Steve Cortes is Long (EXC); Steve Cortes is Long (GS); Steve Cortes is Long (SO); Steve Cortes is Short (F); Steve Cortes is Short (BAC); Steve Cortes is Short (DBA); Steve Cortes is Short Natural Gas; Steve Cortes is Short Silver; Steve Cortes is Short Wheat; Steve Cortes is Short Corn; Steve Cortes is Short Beans; Steve Cortes is Short Japanese Yen; Joe Terranova is Long (C); Joe Terranova is Long (VRTS); Joe Terranova is Long (GS); Joe Terranova is Long (JPM); Joe Terranova is Long (UPL); Joe Terranova is Long (MS); Joe Terranova is Long (PBR); Joe Terranova is Long (BAX); Joe Terranova is Long (TEVA); Joe Terranova is Long (IBM); Joe Terranova is Long (BTU); Joe Terranova is Long (POT); Joe Terranova is Long (XOM); Joe Terranova is Long (DIS); Joe Terranova is Long (RSX); Joe Terranova is Long (CNQ); Joe Terranova is Long (CNX) Puts; Tim Seymour is Long (AGU); Tim Seymour is Long (BAC); Tim Seymour's Firm is Long (POT)

For Brian Kelly
Accounts managed by Kanundrum Capital Are Long (TLT)
Accounts managed by Kanundrum Capital Are Long U.S. Bonds
Accounts managed by Kanundrum Capital Are Long (GLD)
Accounts managed by Kanundrum Capital Are Long (SLV)
Accounts managed by Kanundrum Capital Are Long Gold
Accounts managed by Kanundrum Capital Are Long Corn
Accounts managed by Kanundrum Capital Are Long Soybeans
Accounts managed by Kanundrum Capital Are Long Wheat
Accounts managed by Kanundrum Capital Are Long Euro
Accounts managed by Kanundrum Capital Are Long (VLO)
Accounts managed by Kanundrum Capital Are Long (RDC)|
Accounts managed by Kanundrum Capital Are Long (MCP)
Accounts managed by Kanundrum Capital Are Short Yen
Accounts managed by Kanundrum Capital Are Short (XLF)
Accounts managed by Kanundrum Capital Are Short (IXG)

For Dennis Gartman
Funds managed by Dennis Gartman are Long Gold
Funds Managed by Dennis Gartman are long Oil
Funds Managed by Dennis Gartman are long Canadian Dollars
Funds Managed by Dennis Gartman are long Australian Dollars
Funds Managed by Dennis Gartman are long Corn
Funds Managed by Dennis Gartman are long Sugar
Funds Managed by Dennis Gartman are long Natural Gas
Funds managed by Dennis Gartman are Short Euros

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Scott Nations is long (SPY)

For Heather Jones
BB&T Capital Markets is a Market Maker in (SFD)
BB&T Capital Markets is a Market Maker in (TSN)
BB&T Capital Markets expects to receive or intends to seek compensation for investment banking services from Smithfield Foods, Inc. and Tyson Foods, Inc. in the next three months.
An affiliate of BB&T Capital Markets received compensation from Smithfield Foods, Inc. and Tyson Foods, Inc. for products or services other than investment banking services during the past 12 months. The analyst or employees of BB&T Capital Markets with the ability to influence the substance of this report know or have reason to know the foregoing facts.


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