Why Dennis Gartman changed his mind on US stocks

Dennis Gartman: It's ugly out there
Crude prices heading lower: Dennis Gartman
Markets acting like it's 1904 again: Tom Lee

Investors in U.S. stocks should be at best "neutral" and at worst "slightly bearish," closely followed market watcher Dennis Gartman said Monday.

"It is very difficult to put together a bullish case for stock prices," said Gartman—citing problems in China and Europe, falling bond yields and commodities prices trending lower. He generally looks at the market on a short-term basis.

"I think the best thing to do is to quietly go to the sidelines and allow the circumstances in Europe and ... China wend their way through and clarify themselves," the founder and publisher of The Gartman Letter told CNBC's "Squawk Box" in an interview. "We're probably not closer to a bottom. I think we're closer to the top."

U.S. stocks opened lower Monday—coming off the worst weekly drop for the Dow Jones industrial average since January and the biggest weekly declines for the and Nasdaq since March.

"Two [or] three weeks ago I was quite bullish on stocks," he said. "[But] now I see a lot of reasons to be at best neutral on stocks here in the United States and even slightly bearish of them."

Gartman also said he's troubled that advancing stocks versus declining stocks were not making new highs recently along with the market overall.

Read MoreWhy US stocks may rebound in second half: Strategists

"The overriding fundamental is China," he said, on a day when Chinese stocks dropped nearly 8.5 percent. "I tell you to pay a great good deal of attention to what's going on in China."

The Shanghai composite had surged 147 percent in the 12 months leading up to hitting seven-year highs in mid-June. But since then, the market has fallen about 27 percent based on Monday's close. In recent weeks, the Chinese market had been staging a bit of a recovery, after Beijing stepped in with rescue measures.

"The government [there] is doing everything it can to try to pop up stock prices, and thus far has been utterly unsuccessful," Gartman contended. "Usually government intervention ends badly, and this does not look pretty."

Other market watchers like Tom Lee, the longtime bull at Fundstrat Global Advisors, were undeterred by China—telling "Squawk Box" in a separate interview that U.S. stocks appear poised for a second-half rebound.