Mike Zigmont 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

Active. Capital flow was high today, printing 121% by the end of the day. This is pretty interesting when we consider that we experienced yet another slow news day. Overseas equities were higher, especially European markets, and our premarkets were higher in sympathy. The S&P opened up a handful of points and toyed with being up 10 handles for most of the day. With the exception of the capital flow, everything about today is unremarkable. Yesterday was a dip, today was quiet w/r/t news, the dip-buyers went to work.

But….

The tape doesn’t have the pep that is used to. Today’s response to yesterday’s dip was typcial in the morning but it weakened to something pretty meh by the close. Also, past dips reversed on about average flow. Today’s flow was heavy. To me, this suggests that the sellers are more than happy to dump into the dip-buyers… the sellers didn’t get steam-rolled today… it’s a different feel to the intraday action.

What’s it mean? We could speculate that the bull is tired…or completely done… or somewhere in between. That’s *

very

* dangerous speculation of course. Maybe it’s me being a valuation bear, seeing what I want to see. The S&P could jump 15 points higher

tomorrow

and we could be off to the races again.

My case for a transition in the making is very circumstantial. But this is the second consecutive session where the old patterns are not present. As we observe these new dynamics, we are witnessing higher interest rates, a stronger dollar, and a less-than-wonderful earnings season (it’s too soon to call it disappointing but it isn’t great).

So *

if

* the market were to turn now/soon, there are very reasonable circumstances to justify it. This market detached from fundamentals a while ago, it has been a sentiment-driven market for a long time. The bullish sentiment always had strong earnings growth at its core. If that rationale is now questioned….. all the other fundamentals will begin to matter.

Sentiment sentiment sentiment. That’s the driver of the market. That’s not news obviously but the sentiment has been bulletproof and positive for about a year. The bulletproof nature of that sentiment is at risk.

I’m not saying that we are experiencing a transition but the conditions are ripe for it.

See you

tomorrow

,

-Mike