“One Group Will Be Spectacularly Wrong”

The title was coined by none other than the Macro Tourist, Kevin Muir in another of his fine posts.

One Group Will be Spectacularly Wrong

In the post he outlines why those of us raising the RISK profile on the markets based on sentiment (my hand is raised) may be wrong in using Dumb Money – which per this Sentimentrader graphic (by way of NFTRH 549) is leading the the market higher – as a contrary indicator.

Chillingly for any bears reading this, Gartman has been issuing warnings and is “not comfortable” and is indeed “very very uncomfortable”. If you are an active bear and you consider the source, you can’t not be uncomfortable yourself when taking that quote in a vacuum.

dennis gartman

To make matters worse, this dials my mind back to the post-election period when Smart Money was bearish and Dumb Money was bullish. For a long grind upward Dumb Money was smart and later Smart Money joined them.

Want proof? Well here it is. As we noted (and had to deal with) in NFTRH at the time (Q4 2016), the Trump Rally was kicked into gear by the Dumb Money just as it is Dumb Money that is sponsoring the current rally. Note a couple of things, however.

Thing 1: Dumb Money got dumb again at the top of the rally (January, 2018) and Smart Money got smart again for having faded it. We were appropriately with the Smart Money then. The Trump Rally came after some real bearish sentiment issues, post-Brexit and that is a notable difference to Thing 2…

Thing 2: Dumb Money is and has been chasing the current rally ever since being incredibly dumb on Christmas Eve (I am pleased to say that I, and my newsletter were opposite that stance). Point being though, the dynamics are far different from the post-election period.

Still, there is that bearish Gartman thing and that alone is its own incredibly bullish indicator (unless of course he’s been flipped by the bullish market activity since April 18, which is always possible).

Anyway, read Kevin’s article. It’s always good to check your assumptions.

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