The Zigmont Report (Daily Market Recap for 6/29/18)

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

FYI I’ll be out next week on vacation.  No Recaps until July 9th.

This is how we do.  And by we, I mean the bulls.  And buy do, I mean buy.  US equity futures began rallying modestly last night and the S&P opened about 12 handles higher.

No major news to credit.  No significant data release either.  Capital flow was light at 92%.

The bulls retained control of the tape early and pushed the S&P to an intraday high of up 27 handles!  That’s a lot of dip-buying!  It probably drew some tape-chasers in at that point since is coincided with the close of the European markets and today is the last day of the month, quarter, and half.

The S&P leaked most of those gains away over the rest of the session but the end result is a significant mitigation of the damage done by the bears earlier I the week.  Despite the significant swings of the week, the S&P is about 1% lower than last Friday.  That’s no big deal.

If there’s anything to be gleaned from this week’s price action, it’s two things:

  • There is a bonafide struggle between the bulls and the bears for the spirit of the market
    • This is different than the last few years and especially Jan’18, where the bulls were in total control
  • The bulls, specifically the dip-buyers, are still a force to reckon with
    • They are slower (more cautious) than in the last few years but they are almost 100% reliable to bounce the market

I still believe that the investing world will change radically, and the above dynamics will cease to exist, *if* we get a major change in the investing landscape.

Until then, I think we remain in a range-bound equity world where the bulls don’t have the enthusiasm to print new highs and the bears don’t have the ability to scare the bulls off their buy buttons.

It’s essentially a philosophical stalemate out there and we are in a period of status quo trading.  The bulls think the economy is about to ramp like never before and it will lift all equities even higher.  The bears think valuations are too high and that downside risks are just around the corner.

Neither camp has the data to win their case and so here we are and here we’ll stay…until we get the big news, whatever that ends up being.

See you in a week, Happy Fourth of July,