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
Second day is a charm. The dip-buyers got the job done today. US equites rallied strongly and the latest dip is essentially repaired. Today’s big rally wasn’t a lock early on though. The premarket was only a couple handles higher. The rally for today built over the course of the session and while the latest batch of earnings reports, especially Facebook, is being credited for the rally today, I disagree.
All those results were out last night and before the open but the bulk of today’s gains occurred during the day, after noon specifically. It looks to me like a simple momentum play. The bulls won the open and the gains held into the European close and investors started to chase each other over the rest of the day. *That’s* the kind of behavior we used to see from the dip-buying population over the last two years. It’s good to see them back at it. As I said yesterday, it’s also interesting to see that they don’t have the enthusiasm of the past nor do they pounce as quickly.
Here’s my sentiment conclusion: the waiting-in-the-wings-bulls are still there but they are slow-moving now. They need a small up day to provide assurance they’re not walking into a buzzsaw and they need the subsequent day to really get things moving. Interestingly, today’s capital flow was light at 92% but that’s significantly heavier than the bulk of the sessions this earnings season.
The above micro drama between the bulls & bears isn’t very robust (if it’s even true.) This is because it is completely dependent on a lack of meaningful news. We’ve have quite a stretch of insignificant events and the investing landscape today isn’t really different than the one two weeks ago. This allows the bulls and the bears to play their games and react to their charts. The result is a choppy, but trendless, market.
A big fundamental catalyst will re-write the rules of the game. Until that happens, I think the bulls can’t make new highs and the bears can’t test recent lows (early April). We’re left in a fairly wide range where the noise will be great and the swings have the potential to fool you into thinking a trend is just about to emerge.
Not gonna’ happen…not without a major change in the investing landscape.
See you tomorrow,