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Why Gartman Is Getting Out of the Stock Market

Friday, 24 Aug 2012 | 11:03 AM ET

Just as multiple Wall Street firms are ramping up their projections for the stock market, veteran hedge fund manager Dennis Gartman is getting out.

Dennis Gartman
CNBC
Dennis Gartman

Gartman, author of the widely followed Gartman Letter, said Friday he has dumped his remaining long positions on stocks and is heading to the sidelines.

The move comes as firms such as Piper Jaffrayand JPMorgan have recently upped the ante on their expectations for the Standard & Poor's 500 , which Gartman sees as vulnerable due to economic headwinds and diminished hopes for more central bank easing.

"Yes, we do indeed understand that this is a shift in sentiment; and yes we do understand that we had said that stock prices might 'melt up,' and yes we further understand that we may look foolish in the weeks ahead for standing down," he wrote this morning. "But call it trader’s intuition or call it what you will, but we wish to move quietly to the sidelines and watch henceforth."

To be sure, Gartman is a trader and his positions sometimes don't last long.

But he pointed out that a proprietary index his firm uses fell 0.8 percent in the past day, and he discussed at length why he thinks more stimulus from the Federal Reserve (learn more) is not as likely as some market participants expect.

Specifically, he cited a Thursday appearance from St. Louis Fed President James Bullardon CNBC, during which the nonvoting central bank official said the economy is growing slowly but sufficiently enough not to need more central bank money printing.

Consensus on QE3 Is Wrong: Gartman
Dennis Gartman founder of the Gartman Letter told CNBC, he thinks that the market consensus on the Fed minutes- that QE3 is imminent- is wrong. He believes QE3 is being debated and discussed but that direct bond buying is not hard upon us.

Moreover, China's prospects are weakening, putting pressure on positions Gartman had in steelmakers and on metals and resources in general.

"The steel industry in China is a literal disaster and steel share prices broke hard yesterday," he said. "Steel is a simple thing, like coal and ball bearings, and trucks and railroads. It is central to global economic strength. We'll bet in its favor once again in the not too distant future, but not now given that we were standing down from our previous bullish posture this morning."

Markets wobbled in morning trading and were heading towards closing out a losing week.

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