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
Very odd. Asian markets fell overnight and Europe couldn’t buck the trend. Our premarket futures were down almost 1% in the wee hours of our morning. This was all instigated, it seems, by concerns that the Chinese market was beginning to unravel and that the weakening Chinese currency was the start of something nasty.
As US investors woke up and arrived at their computers, futures lifted. The good ole’ dip-buyers did what they do best and the S&P opened higher at 9:30 AM. There wasn’t any material news to drive the optimism. The market climbed strongly in the morning. The S&P topped out around 10:30 AM, up 0.8%.
That’s a big intraday swing but it wasn’t over.
US equities rolled over, slowly at first, on what appears to be some trade war rhetoric by Larry Kudlow. Downside momentum built from there and equities finished down about 0.8% on the day.
Quite a round trip. Time to take a breath.
Something to consider about today is that the news and data was thin.
The major difference between yesterday and today is sentiment. We have a bonafide fluctuation in the narrative of the market. The bulls woulda, coulda, shoulda lifted the tape higher today.
They made their move but they just couldn’t hold it. Now the bears are getting a little bolder and I’m sure a few longs are getting weak in the knees. The option market bid implieds up more than the price drop would normally suggest too.
Nervousness is climbing but there’s no hard/clear reason behind it. It’s just a change in investor temperament.
I doubt the most disciplined of the dip-buyers will be frightened off by today. Whether they come in strong tomorrow or when the tape is even lower is the big question.
It’s time to play Shrink and get inside the head of the market. The bulls have controlled the tape for most of the year. Are they going to fold here or not?
I think not….even though I think they should.
That might sound like a contradiction but it’s not supposed to be.
See you tomorrow,