The Zigmont Report (Daily Market Recap for 12/11/18)

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.

Hot and cold.  Overseas markets rallied nicely and US/China trade issues were looking on the up-and-up before our open.  China made a statement about reducing tariffs on US cars from 40% to 15%, which is the rate it levies on other countries’ cars.  President Trump tweeted that a significant breakthrough occurred and that an announcement would come later in the day.  Futures rallied hard and the S&P opened up over 30 handles.  The bulls had both momentum and headlines going for them.

The breakthrough announcement never came though and the tape faded slowly throughout the morning.  Around noon, President Trump, Nancy Pelosi, and Charles Schumer started bickering in front of the press.  The meeting was supposed to be behind closed doors but Trump invited the press in and we saw some ugly sausage-making.  Markets didn’t react kindly.  If you watch the footage of the interactions, it’s pathetic.  Maybe that’s how the process has always been and my ignorance is bliss but seeing the pettiness, childish dispositions, and low-brow point/counterpoint interactions was cringeworthy.

The S&P bottomed around 2 PM, down 15 handles on the day.  So the S&P lost about 45 handles over the bulk of the session.  That was a rough turn for the longs.

The bulls pushed in again however and they drove stocks up prior to the close.  There weren’t any big news stories at work.  The blender simply continues and the dip-buyers are still out there.  That’s probably a good news/bad news thing.

The good news is that they are preventing the market from getting sloppy and ugly.

The bad news is that *if we are going to revalue the whole market at lower multiples,* that process won’t be done until the dip-buyers capitulate.

I think that’s the big question for us to consider.  Are the valuations of the summer appropriate or not?

If they are, the bull market is still intact and dip-buyers will be vindicated.

If not, we are already in a bear market… and we must determine what new valuations makes sense.

I think the ship has already sailed but that’s a speculation on my part.

See you tomorrow,
-Mike