The Zigmont Report (Daily Market Recap for 5/3/18)

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

Intraday reversal.  US equity futures were slightly off this morning and things worsened until the close of European trading.  Like so many other sessions, there wasn’t a specific headline at work.  Stocks simply dropped and it looks like momentum players jumped on the trend.  By the lows of the day, around 11 AM, the S&P was off 40 points (about 1.5%).  That’s a little bit nasty.  The S&P was also well below the 200-day moving average level of 2615.

Investors panicked a little bit.  Capital flow was finally elevated too.  We were tracking at a flow level of about 110% from the lows through the next couple of hours.  We finished with a 103% flow value.  That’s not *a lot* of flow but at least it breaks the recent stretch of anemic action.

For whatever reason though, the bulls took over from there and pushed equities higher until the damage was essentially repaired.

There’s no strong conclusion to draw from today.  I think we’re simply witnessing the volatile sentiment shifts *in the absence of news* that have characterized trading for the last couple months.

The dip-buyers are still out there but they’re not jumping in as fast nor as hard as in 2017.  The bears are still leaning on the tape but they don’t have size to crack things badly.  Additionally, each camp can preserve their existing mindsets because the data isn’t forcing anyone to adjust their worldview.

Today is getting attention for the sizeable intraday swing and for the fact that there’s no clear explanation behind it.  Well, we’ve seen this before lately.  We’ll see more of it going forward.  This is the new normal.

  • Fairly light activity
  • Significant intraday moves
  • Intraday momentum feeds on itself
  • Reversals are reflexive either intraday or over the short term but have no staying power
    • Bulls keep things from getting too ugly
    • Bears keep things from getting too rosy

This will continue until the investment landscape shifts significantly.

When’s that going to happen?

Damn good question.  Wish I knew.  *Maybe* it’ll be a Fed action… more likely it’ll be a bolt-from-the-blue.

See you tomorrow,