The Zigmont Report (Daily Market Recap for 11/18/18)

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.

Role reversal.  The pattern of trading today was almost an inverse of earlier in the week.  Today we saw premarket weakness…instead of strength.  Today we saw strength into the close of European trading…instead of weakness.  Today we saw the bulls control the intraday action as well as the close… instead of the bears.

Today wasn’t a perfect inverse of Monday or Tuesday of course but it felt like it.  It felt like the same old tension between the bullish and bearish sentiments, with the results flipped.  It’s not a big deal but it’s interesting.  It suggests that we continue to exist in a market of whimsy.  Emotions are behind the pushes in the tape and they build or wane as the tape moves.  The skittishness grows as the market ticks down and the brazenness swells as the prices tick higher.

There were a couple of news items but they’re more significant in shifting attitudes than investment realities.  Take a look for yourself:

  • Federal Reserve Vice Chairman Richard Clarida threw a dovish soundbite out there
    • “Certainly where the economy is today, and my projection for it and the Fed’s projection of where it is going, I think being at neutral would make sense.”
  • President Trump gave the market hope that the US/China trade tension was easing
    • “China wants to make a deal.  They sent a list of things they are willing to do, which is a large list and it is just not acceptable to me yet, but at some point I think that we are doing extremely well with respect to China.”

I see positive possibilities above but I roll my eyes at the suggestion that these are meaty developments.  It’s probably most reasonable to look at these developments as cause for *not* being despondent.  I.e. I think this news is reason to move from pessimistic thinking to neutral thinking.  This is not a reason to price optimism in.

Until a trade deal is announced and/or the Fed meaningfully changes their hiking path, we’re in the same place as before… we’re just not too extreme in our feelings.

That’s a pretty respectable condition for the markets too.  Maybe this is the beginning of taking some of the emotional volatility out of investor behavior.

If that’s true, the actual volatility of the markets should dampen as well.

Dare to dream.

See you Monday, have a great weekend.