The oil rout was the story of 2015, how to know when a bust like oil will end
Dennis Gartman is a bit of a punching bag in markets due to rampant overexposure and his stilted style but he makes a great point on how major moves end.
He's talking about oil here but he could be talking about anything:
"It will end in panic liquidation," Gartman said Wednesday on CNBC. "It will end when you've had an announcement of five or six bankruptcies. It will end when mergers and acquisitions step in and take over."
He's a bit over the top but at the very least, some serious production shutdowns and layoffs will come before oil bottoms. When oil fell to $42 in mid-2015, many market watchers predicted the pain was coming but oil producers remained remarkably resilient, partly because borrowing is so cheap.
True bottoms don't come until all the bulls have been cleaned out. Even the patient ones who only bought at severely depressed prices. It comes when people are making ridiculous predictions like $12 as oil companies are blowing up.
From a trading perspective, it's never a good idea to pick tops and bottoms. Pinpointing them is terribly difficult and there will still be plenty of upside when the market begins to turn.
