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
It’s a little different out there. US equity futures were weak in the premarket again. This was again a function of overseas weakness. News wasn’t terribly interesting although PPI data came in hotter than expected in the US. Interestingly, in Europe the inflation data was in line. Anyway, the market implied probability of a Fed hike in December is now 93%. US treasuries didn’t do much today so we can’t say that the market was surprised (or more accurately, worried) about inflation.
So that’s the scene for the morning. Europe a little weak, news was light, inflation was a touch hot in the US, and US equity futures were off 5-7 handles. No big deal, we’ve seen this type of morning before.
The tape softened further after the open and bottomed a little after 10 AM. The dip-buyers did their thing again…. Just like they always do.
And we finished the day with a modest loss. This is no big deal although the fact that it happened again is a little different.
What’s different and what strikes me as *maye* the beginning of something is the fact that the morning weakness keeps returning.
If we go back to the market of two months ago, whenever weakness showed up, it was stomped out of existence. *Maybe* the bears would try to drop the tape the day after a prior dip or the day after the bulls reversed things the session before… but they were creamed for their hubris. A weak tape never showed up three mornings in a row. By the third morning, the bears were on the sidelines licking their wounds as the bulls marched things onwards and upwards.
Not for the last week. Weak premarkets have been the norm. The dip buyers have responded as usual but they haven’t forced the bears out of the game this time around. The bulls don’t control the tape anymore.
This is what’s a little bit different.
Is it just a buyers’ strike, are the bulls simply tired, are the bears flexing beer-muscles? Is there deeper meaning here?
I don’t know. All I know is that for the first time in a long time, the market is experiencing a true contest between the bulls and the bears. It’s no longer a one-sided affair.
That’s what I wanted to share.
See you tomorrow,