The Zigmont Report (Daily Market Recap for 10/16/18)

Mike Zigmont

Mike Zigmont, author of the Zigmont Report, is a partner at New York-based Harvest Volatility Management, a hedge fund with over $12B 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 and do not necessarily represent those of Harvest Volatility Management, LLC.

Just like always.  The dip-buyers showed up in force today and they essentially replicated the bounce-behavior of past dips and recoveries.  The news today wasn’t terribly important.  The data today wasn’t that big of a deal either, Sep industrial production (0.3% vs 0.2% est & 0.4% prior) was nice and JOLTS job openings (7.1 mm vs 6.9 mm est & 7.1mm prior revised from 6.9mm) was stronger than ever.

Those data points were being referenced as key reasons pushing the market higher.  I challenge that.  JOLTS hasn’t mattered since the depths of the crisis and industrial production is almost never a market-moving number.  The rally was happening overseas in the wee hours and only gained strength over the day as momentum players and tape-chasers jumped in.

Today has a very fear-of-missing-out feel to it.  The rally today is the proof that the bearish spirits are defeated and every tick higher confirms that view.  On both the upside and the downside, the market has had a habit of justifying the current mood by pointing to the last 20 handles of movement.  Obviously that’s silly but it continues nonetheless.

The bulls have answered the bears very strongly today.  The bears still own the month but the shift in sentiment has been so sharp that the bulls are acting as if this moment is offering up the buy-of-the-year opportunity.

Sentiment continues to be the only thing that matters and sentiment has been quite volatile lately.  Today the market feels bulletproof but how will it feel tomorrow?

Last week, we anticipated the market was going to get more volatile on both the up and down sides as Fed normalization led to normal gyrations in the market (from a historical standpoint).  I think we’re experiencing that now but the market is perceiving the upside surge as an all-clear signal.

I think that’s a misinterpretation of the environment.  We are going to swing big in both directions.

See you tomorrow,