The Zigmont Report (Daily Market Recap for 2/13/18)

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

Quieter.  The S&P moved a fair amount intraday but compared to the recent past, it was nothing.  The S&P started out down modestly (about 19 handles) but zigged and zagged its way higher over the session.  We finished up about 7 handles.  Today’s capital flow was *light* at 92%.  Economic news was uninteresting and most market-watchers are waiting for tomorrow’s January CPI – ex food and energy data (0.2% est vs 0.3% prior).

The correction has investors’ heads on swivels and so the worry of an inflation pickup is front-and-center.  An inflation worry that causes yields in the treasury market to climb will be a negative force for equities.  The chart-watching dip-buyers won’t be able to hold back that drop.  I don’t have a view on the pending data though.  I think that unless the number is a true outlier, the market reaction is going to be an overshoot.

Investors are still on edge so they are prone to overreact.  From a quick-money standpoint, I think a small surprise would present a trading opportunity.  If the number is a small beat (not hot), I think you let the market run for a hour or so and sell into it.  If the number is a little hot, I think you buy after the first hour of pain…..

BUT!!!

If it’s a big surprise, forget any attempt at trying to make a quick trade.  A big surprise is going to throw equities into chaos and we’ll be trying to find a whole new trading range/level.

Just thinking out loud.

Setting the CPI data aside for a moment, it sure looks like investors are calming down.  As long as new news and data doesn’t re-rattle them, I think we’re in a new range.

That’s a bit of a big conditional statement but just because the market swung wildly lately, doesn’t mean that the macro data must do the same.  Maybe there isn’t a new boogie-man just around the corner after all?

See you tomorrow,
-Mike