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
Tip ‘o the hat. The bulls and the dip-buyers decided they wanted a do-over after failing yesterday. Today they maintained control of the tape and pushed it higher consistently over the afternoon. It’s a psychological game out there and that’s all that it is.
Doesn’t make it easy to play, of course, but you don’t have to get distracted by interest rates, FX moves, macro data, etc. Those things are normally critical factors in steering the equity market but not right now. Right now, it’s all about the mindset of the investor population. And that mindset is one of cautious greed.
Buy-the-dip is as American as apple pie at this point…. Look at this chart! What equity investor over the last 10 years hasn’t had this chart *and its implications* seared into their minds?
The implication is, of course, to *buy the dip* and (almost as significantly) *not think too much about doing it.*
That behavior will not be broken by a news-less sell off (which we just had).
This behavior will only be broken by a *huge* change in the fundamental landscape.
That means war, or recession, or something else enormously negative.
We didn’t have this week that so it’s a high-probability that the bulls and their ilk keep things from getting too ugly.
They are as reliable as Old Faithful.
Now I happen to think they are crazy. I think they are dangerously ignoring the valuations and various risks but that is momentarily immaterial.
We are in a psychological market and psychology is going to direct the tape.
See you tomorrow,