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
Yellen giveth. US equities were up small in the premarket until Janet Yellen released her prepared remarks for her testimony before the House Financial Services Committee. The remarks were dovish and the bulls went to work. The tape bounced around after the strong open and finished with a little more bullishness thanks to the afternoon trading, once her actual testimony concluded. She didn’t say anything off the cuff to contradict the initial interpretations of markets.
Tech led and financials lagged though every sector gained. Capital flow was light at 93%, which is a bit surprising given the Yellen catalyst. She’s the big kahuna and it looks like the Fed wants to keep the party going. I would have guessed more capital would have moved as a result.
On the face of it, Fed dovishness suggests the bulls have won yet again and that the rally to year-end is a fait accompli. It won’t be long before the S&P prints new highs and the dip buyers chalk up another vindicating win. That said, I think we need to wait and see what Yellen’s testimony to the Senate Banking Committee is like.
Here’s why:
Fed officials (and other central bankers) have tended to walk back remarks that moved markets significantly the day before. They try to keep investors on an even keel. Fed officials specifically have stated a concern regarding investor complacency lately. They may not want to be perceived as juicing stocks through new highs. To be fair, they also try not to spook markets and if they do, they are very soothing the next day .
I would not be surprised if Yellen looks at today’s explosion of bullishness and wants to talk the markets back a littletomorrow
.We shall see if Yellen taketh.
If she does not talk things back, I think today becomes the catalyst we’ve been waiting for, the catalyst to kick markets into motion again.
Today’s kick looks like a bullish one.
See youtomorrow
,-Mike
