The Zigmont Report (Daily Market Recap for 9/20/18)

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.

All-time highs.  Around 2 hours before our open the state of things was pretty pedestrian.  Asian markets had already closed flat.  European markets were up small.  Our premarket futures were up small.

There was no news and the morning looked like yet another uneventful start to the day.  US equity futures began to rally and they never looked back.  The S&P 500 opened the day up 17 handles and consistently rose from there, printing intraday and all-time highs in the last hour of trading (+27 handles).

Capital flow was a bit elevated at 109% and it looks like investors were reacting off of technical cues today.  New highs were within spitting distance and the bulls pushed into record high territory.  I forget whether this is the 999th or 1000th time the dip-buyers have prevailed in the last 10 years but it’s official, the bull is running again.

There’s no material news scheduled for tomorrow so there shouldn’t be any significant catalysts.  That said, option expiration is tomorrow.  A lot of today’s movement (and potentially tomorrow’s) had/will have roots in options positions across the Street and the hedging thereof.  Supposedly 2925 was a level of attraction…

It’s all after-the-fact speculation but today’s larger-than-normal run may have been assisted by the option positions expiring tomorrow, i.e. today’s pop was transitory and isolated.

If true, we’d expect broad market action to quiet down tomorrow and along with a small drop in the equity indices (SPX & NDX specifically).

Of course, predicting moves based on net option exposure and hedging is as reliable as coin-flipping but I’m throwing it out there nonetheless.

We shall see.

See you tomorrow,