Commodity stocks – the names most-linked to the global growth story and the biggest moneymakers of the bull market – got slaughtered today. Has the time come to retire these names from your portfolio? Dennis Gartman, a renowned commodities trader and editor of the Gartman Letter, joins the guys on the Fast Line for his take on the market.
The volatility within the market, not just in commodities, is “incredible,” Gartman says. That being said, he wouldn’t be surprised, given Thursday’s reversal in the financials, if the commodities stocks opened “briskly higher” on Friday.
But Gartman believes we’re in a bear market for equities and a bull market for volatility. A bounce in stocks is likely because it’s hard for the market to shed so many points in such a short period of time without getting some gains back, but chances are the gains will be temporary, of “demonstrably less volume” and will occur in a “far more orderly atmosphere” than a correction in volatility, Gartman says.
The CBOE Volatility Index (.VIX) isn’t the only indicator of this precarious market, Gartman says. He looks at the Euro/Yen cross, which has seen “violent movements” as of late. In addition, Gartman uses the Aberdeen Asia-Pacific Index Fund (FAX) as a gauge of risk in the world. This stock typically trades in a range of about two-to-five cents, Gartman says. Thursday it traversed $1.45. That should give investors an idea of the extreme nature of this volatility on a global scale.
Gartman believes that there are still commodity-based opportunities amidst the stomach-churning nature of this market. U.S. Steel (X) has gone down so much that he thinks it’s cheap enough where he wouldn’t sell it. He would also buy crude oil at present levels.
Finally, Gartman recommends that if investors believe his theory that we’ve entered a bull market for volatility and a bear market for stocks, the best idea is to sell into market strength and not buy into weakness.
> The Gartman Letter Online
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Trader disclosure: On Aug 16 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money; Macke Owns (INTC); (JWN); Najarian Owns (TMA); Najarian Is Short (GS); Najarian Owns (AA) Calls; Najarian Owns Straddles In (ETFC); Bolling Owns Gold; Bolling Is Short (FXI) And Owns (FXI) Put,; Bolling Has Closed Out Of His Long Japanese Yen Futures Trade