Mike Zigmont, author of the Zigmont Report, is a partner at New York-based Harvest Volatility Management, a hedge fund with over $10B AUM, offering volatility management solutions to its investor base worldwide. Mike has been publishing his daily newsletter (Monday-Friday) privately for the firm’s investors and his personal contacts in the investment business since 2008, sending it daily shortly after the market close.
The opinions expressed below are my own
Trade *negotiations.* News came out last night that the US and China are negotiating their trade issues already (and behind the scenes). The market happily took this as a sign that a trade war won’t happen and that trade between the US and China, however it’s renegotiated, will not be negatively affected. That’s a big positive for global GDP and global equities. Friday’s fears, at the moment, seem overdone. That positive news ushered in the bulls and they ripped the tape higher. The dip-buyers did what they like to do and they won themselves *yet another positively-reinforcing example* in the market. Let’s remind ourselves with a picture again.
I cannot stress enough how powerful the US equity dip-buying behavior has become. It’s a near-religion at this point. Investors are at a point where they close-their-eyes-and-buy.
Listen to me now and hear me later. I’m not saying today was a mistake. I *am* saying that the behavior is dangerously ingrained. 10 years of always working has left its mark on the psyche of most investors. Just buy is the mantra. Ignore the headlines is the rule of thumb. Stocks always/eventually go up is the rationale.
This is crazy but this is a reality… and it is a powerful force in the market.
We need to recognize it while at the same time, not participate in it. Maybe that’s a contradiction in terms?
I don’t know when, but some day, the *don’t-think, just-buy* behavior is going to lead to a disaster.
Anyway, today was a heck of a rally. It began with good fundamental news and it appears exacerbated by momentum trading and dip-buyers chasing each other higher.
How much longer can the bulls extend things? I don’t know but I’m guessing they have a day or two more in them. We are trading more off of the charts than anything else and the bearish stretches versus the bullish stretches feel a lot like a my turn/your turn dynamic.
That’s more likely to continue than end. I don’t see fundamental forces shifting enough to lift the market into a new bullish trend, nor do I see the opposite. We’re in fundamental limbo so we’ll probably be in trading limbo too…. but, but, BUT!!!!
The swings are going to be BIG along the way. Today was just the most recent example.
Hang in there, see you tomorrow,