The Zigmont Report (Recap for 4/8/19)

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 and do not necessarily represent those of Harvest Volatility Management, LLC.

Unsinkable dip buyers.  US equities started the day in the hole about 10 handles.  There wasn’t much in the news to cause it although overseas markets were mixed so after the long stretch of up sessions, it’s not surprising to think many investors were expecting and playing a drop today.  That’s exactly how trading began but the bottom printed within 15 minutes of the open and dip-buyers pushed the S&P higher consistently over the whole session.  Capital flow was incredibly light at 81%.  So it was another example of no news, no volume, just buying.  The consecutive up-session streak is now at 8.  Last time this happened was October of 2017.

The rally wasn’t significant if you only look at the close but the intraday move was as plain as day.  All dips get bought.

We remain in an environment where the active investors don’t have much capital to throw around but they are lifting stock prices at all moments in time.  Does this make sense?  Who knows and also…so what?  Fundamentals are a useless way to play stocks right now.  They’ve been useless since the Fed pivoted in late December.  All that matters now is momentum and the chart.

That obviously will not last forever but at the moment longs don’t care a whit and they are justified doing so.  This feels like a game of hot potato and until it ends, it’s going to be big fun for the bulls.

If it ends with a fizzle, then all the buying along the way will have been worth it.  If the game ends with a 5-plus percent selloff, it’ll be a painful mistake.

Earnings season kicks off Friday morning with JP Morgan.  That’s the next significant junction for the market.

The numbers are unlikely to surprise.  The forward guidance will make or break the tape.

See you tomorrow.