The Zigmont Report (Daily Market Recap for 10/26/18)

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.

Rough finish.  The end of the week didn’t go well.  After the close yesterday, Amazon and Google beat earnings like crazy but the revenues and guidance were not what the Street expected.  Those stocks were punished in the after-hours and they made a big dent in the broader market.  The sour mood carried through to Asia overnight and Europe in the morning.  Our futures were off sharply before our open.

Data today wasn’t very important although the advanced estimate of Q3 GDP was good (3.5% vs 3.3% est & 4.2% prior).  This number didn’t move the market much but it’s a healthy number.  I wouldn’t use it as a justification for the current valuations but for all the dip-buyers out there, this helps their case that things are good.  Tru dat.  Things are good.  Growth is good.

The market fell significantly early.  The low for the day was at 11 AM and the S&P was off 77 handles.  From a time of day standpoint, that’s the usual pattern.  The depth of the fall was pretty ugly.  The bulls and dip-buyers went to work and repaired all the damage though.  We almost turned positive by 1 PM!

That is a pretty good showing by the bulls….  They didn’t have the muscle though and the bears took stocks back down in the afternoon.  We lost about 47 handles when the market closed.

That’s not good but it’s not a panic/disaster.  I don’t think it will trigger/contribute to a horrible Monday.  If anything, it may attract dip-buyers as they see the market bottomed intraday.

We shall see.

Ultimately, for an orderly market to proceed, whenever the bears win, they cannot win by too much, too quickly.  If they beat up the bulls too badly and shock them out of the market, the downside will be awful.

The bulls took a hit today but I don’t think they are too scared/gunshy to be back next week.

This is a purely psychological and emotional game between market participants.  It’s going to be fast and seemingly random but as long as one group doesn’t overwhelm the other, it’s not going to be a one-way street.

See you Monday, have a great weekend.