The Zigmont Report (Daily Market Recap for 3/23/18)

Mike Zigmont

Mike Zigmont, author of the Zigmont Report, is a partner at New York-based Harvest Volatility Management, a hedge fund with over $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 it daily shortly after the market close.

The opinions expressed below are my own

That was fast.  China didn’t wait long to respond to Trump’s targeted tariffs.  They announced last night.  They are targeting $3 billion worth of tariffs… so that’s much less than the $50 billion Trump announced but the composition of the Chinese tariffs is very interesting.  China targeted a bit more than 100 product categories (versus 1,300 by Trump) and it appears that most (maybe all) of those product categories affect geographic sections of the US *that supported Trump* in the presidential election.

  1. That’s noteworthy.  First, China isn’t rolling over.  Second, they are applying a very different kind of pressure as they play this poker game.  The fact that they chose a much smaller dollar figure suggests that they don’t want the actual economic repercussions to spin out of control.  That’s good.

The fact that they are trying to hurt Trump’s domestic support is a wildcard move.

How will Trump react to that?  Will he take it personally and therefore react with emotion?  What’s the next move going to be?

I don’t know.  Nobody knows.  It’s yet another wrinkle in the whole kit and caboodle and investors aren’t happy about it.

Dip-buyers tried to keep things from getting ugly throughout the beginning of the day and the S&P was actually higher for most of the morning.  The S&P even had a small gain at 2 PM but bears overwhelmed the bulls and the tape sunk continuously into the close.  The overall drop was large but volume was surprisingly light.  Capital flow was 117%.  That’s obviously more than 100% but for a drop like today, after yesterday’s drop, that’s way lower than one would expect.  I would’ve guessed flow would’ve been more than 150% today.

Let’s look ahead.

Things are getting dicey for sure but I think the (current sidelined) bulls are just waiting for their turn.  They’ve taken a drubbing with two consecutive days of significantly negative news.  If a bit of positive news shows up, they’ll be off to the races.

Good luck figuring out when that’ll be.  Maybe Monday?  Whenever it comes, the ramp-up will be big and fast.  I don’t think it’ll lead to a change in trend but it’ll rip up a lot of bears.

Have a great weekend, see you Monday,