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 shortly after the market close.
The opinions expressed below are my own and do not necessarily represent those of Harvest Volatility Management, LLC
Weakening. Bears are getting more bearish and vocal. After being flayed for 8 years, the recent stretch of trading is encouraging the bears to believe (yet again) that this is really, finally, truly, the beginning of the correction…. Pinky swear.
I too am bearish but I won’t go so far as to say that this is it. My reasoning is that this game has been played umpteen times, especially in the last 3 years. At some point, the dip-buyers regroup and rip the tape higher. Of course past performance is not an indicator of future results but still, people have memories and the bears (however encouraged they may be) are worried about getting smoked another time.
When in doubt, let’s look at the chart. This is a 5-year history of the S&P 500.
maybe
*, they’ll abandon their plans if we break 2000 or 1800…. But by that time, it’s kind of too late, no?What I’m trying to say is that however weak things seem momentarily, there won’t be any meaningful downside just do to technical factors. The dip-buyers will stop the halt 1-2% lower from here unless (big unless) there’s a major change in the investment landscape.
Maybe recent weakness suggests that sentiment is ripe for a change but it still must be forced to change in the face of something major. We continue to wait for that major something.
As we wait, the question naturally becomes “What should I do?”
I think the risk-reward favors lightening long exposure. Don’t go short and don’t make a large-sized adjustments. I favor a marginal action because it is a speculation right now… an anticipation of a coming catalyst.
If we actually knew something, that would be different. At the moment, all we have is suspicion, and that only has marginal value.
See youtomorrow
,-Mike