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

What do you do with a dip? Obviously you buy it. Investors responded to yesterday’s 4 point drop with a 12 point rally. Macro news in the morning was uninteresting and the tape only climbed notably from

2 PM

on, a period devoid of news. The point being that there’s no headline to point to that explains today’s rally. Capital flow was healthy at 120%, so significant money moved again, although this is light for an option expiration

Friday

. Here’s something sorta kinda interesting though. The government may shut down

tonight

. Markets didn’t care. To be fair, if there is a shutdown, it’s not going to affect important government functions. It’s my understanding that certain federal employees will stay home as their pay is suspended until government reopens… and in the past those employees were back-paid for the time the government was closed.

This budget showdown certainly appears to be a piece of political theater. Who knows which party comes out on top in the opinion polls but from a how-serious-is-this standpoint, we’re on the precipice of a big fat nothing.

There is always a risk that the shutdown lasts weeks/months…at that point things may get more serious for the country. But for the moment, if the government shutdown is a few days, it’s not going to matter much and investors are rightly unconcerned.

What’s on the horizon? Next week the ECB announces its next decision. Nothing material is expected there. We also have the first big wave of earnings coming.

Those events don’t seem like intense catalysts to me. It seems like big surprises will be lacking and so we’ll be trading based on expectations fulfilled. What’s that going to mean for the tape… probably more smooth appreciation.

Market sentiment is on rails. It’s unlikely the equity market behavior changes until something knocks sentiment off those rails.

That doesn’t look likely next week.

See you

Monday

, have a great weekend,

-Mike