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

Small dip, small rally. The morning started out with another bullish party and the S&P traded 10 handles higher early on. This was on the heels of a no-change policy announcement by the European Central Bank and increasing earnings announcements where positive surprises continue. News and announcements played out as per usual and the stock reaction was usual.

The bulls couldn’t keep the tape significantly higher though. Stocks faded into negative territory by

10 AM

and from there we meandered about and finished slightly higher. Capital flow was elevated again today at 119%. Momentum indicators on the S&P, like RSI, are through the roof. 14-day RSI is 83.3 and almost at all-time highs (current record is 84.9 in May 1995) and 30-day RSI is 78.5. but the all-time high was set

Tuesday

at 78.8.

No need to dig into the calculations. These numbers quantify the momentum of the S&P 500 and they demonstrate something we all know intuitively: bullish momentum is very high. What we may not have realized is that it has essentially never been higher. So market watchers, even the bulls, are all wondering the same thing.

When’s it going to end? This momentum cannot continue much longer.

Perhaps more important than when will it end, is *

how

* will it end?

Bulls think we’ll get a pause. Bears think we’ll get a drop.

So far the bulls have the advantage. The verdict isn’t in but yesterday and today look like a pause….

For the record, in 1995 the record momentum broke with a 20 bip down day and then a 1.4% down day.

Bulls had the last laugh though because the dip was bought and the S&P was higher by the end of the month…and the year was a huge winner for the bulls, with a 34% price gain.

The point being that the momentum has to slow/reverse but that fact has no significance to the larger forces at work. Dip-buyers are gonna dip-buy.

See you

tomorrow

,

-Mike