Big BIG Trouble – BMO says Go to Cash

Posted by BMO - Comments by Dennis Gartman & Richard Russell

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6/10/2010 – Again, we shall warn our clients/readers/friends that the manner in which the US market closed yesterday was hardly to be construed positively, for as we’ve said, bear markets historically open each day higher and close hard upon their lows, while bull markets open lower and close hard upon their highs. Clearly what has been happening in the course of the past several weeks in the stock market here in the US is not of the latter form and is much of the former – Dennis Gartman

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From Richard Russell 6/09/10 – “A switch — Suddenly, traders and investors believe that the market is weak and that more downside action is just around the corner. As a result, they’ve piled into puts on the S&P which is insurance against downside losses. In fact, the price of puts has surged, meaning that downside insurance has become crowded. When this happens, you can bet that the stock market is ready to rally and cross up those who are betting on more immediate downside action.” “I don’t like the picture. Selling pressure continues powerful and in the driver’s seat, while buying power is weak”. Dow Theory Letters


Go to Cash: Facts and Fiction

In a surprising development, the most bearish, and easily most comprehensive, report that we have read in a long time on the broader markets, comes from Canada of all places, via BMO’s Quant/Tech desk. The report’s title is simple enough: Go To Cash – In Plain English. Not much clarification needed – via ZeroHedge

Here is the gist:

“We advocate switching out of equity positions and going to cash. The European sovereign debt crisis appears to be nowhere near over. The global credit environment is worsening. Cost of capital is going up and availability is going down. There are large gaps between where the credit market prices risk and where the equity market is priced. Equity is lagging the deterioration in credit conditions. Moves in currency, equity and commodity markets are mirroring the moves in the credit market. Global growth, in a credit-constrained environment, will slow. Profits will be squeezed by the higher cost of capital…We advocate a zero weight toward equity, and that investors convert their equity positions to cash.”

……read the whole BMO report HERE