The Zigmont Report (Daily Market Recap for 7/9/18)

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

Optimism.  I might call it unbridled if the flows today were heavier.  Capital flow was extremely light today at 89%.  It doesn’t look like many investors returned to the markets after the weekend.  Maybe they’ll return as we begin earnings season?  Speaking of, it kicks off tomorrow morning with PepsiCo.

Actually the first really big earnings report will be JP Morgan on Friday morning but maybe PEP can generate some excitement.  We shall see.

Regardless, when it comes to today, and the two prior sessions, the bulls have had quite a party.  There’s no meaningful fundamental driver of all this buying either.  Today was a very light news day.  It looks like dip-buyers are confident that the late June selloff established a local bottom and now it’s up, up, and away.  Here’s the chart.

I wonder how much further the buyers can move the market on light volume.  The yield curve isn’t helping the long’s case and the trade tariffs are being implemented.  The results of earnings season will need to be stupendous to counterbalance those negatives AND justify the valuation expansion in progress.

Anything’s possible in the short term, especially when the market is trading like it is, a 95-5 allocation of feelings and fundamentals.

So, as in the past 9 years, the shorts are playing a dangerous game.  I don’t expect them to defend any levels with gusto.  I expect them to make moves on disappointing data and let the optimists control the tape in the meantime.

So when’s the next significant datapoint?  PEP probably isn’t it.  I’m thinking JPM won’t be either.  We may be waiting for a while.