The Zigmont Report (Daily Market Recap for 11/30/17)

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

SMACK!  The bulls/dip-buyers just skinned the bears alive…again!  Capital flow was heavy too…again!  Today it was 161%.  You can’t ignore what the market does when a lot of money flows through it.  Anywho, the story of the day is that this all feels very squeezy to me.

Let me ‘splain…. No, there is too much.  Let me sum up.

  • No major news today
  • Dip yesterday, especially in FAANG
  • It’s month-end and the S&P is up 2.8% in November
  • This is the 8th consecutive up month for the S&P, the only down month this year was March (down 3 bips)…there’s only one trend in any/all time horizons
  • Intraday highs (up 1.2%) printed after McCain said he’d support the tax reform bill
  • Implied volatility was up while the S&P was up (very unusual)
  • Bitcoin was down again today (off ~$600)

All this feels squeezy because half percent (or greater) moves in the S&P have been quite rare this year and the days where bigger moves occurred usually corresponded to meaningful news events.  Stocks rallied today in a couple of intense stretches and it looks likes shorts were covering and/or longs were piling in.

Some are saying that the McCain news really pushed us higher but that news was out before the major ramp-up during the morning.  Also, we’ve been talking, for over a week, that the market’s perception was/is that the tax reform bill was a fait accompli.  Where’s the surprise?

Maybe some die-hard shorts capitulated… who really knows?  I’ll admit that’s possible I just don’t think today was news-driven.  I think it was a positioning rally plus a momentum rally.   It feels like stops were triggered for a lot of shorts and the longs chased because of fear of missing out.

All that’s left for the year is December…and things will get very quiet after the FOMC decision on Dec 13th.  By the way, the market is pricing another 25 bip hike for that meeting with 98% certainty.

This means December is effectively 2 weeks long.  It’s been a great year for the longs, the S&P is up 18% YTD plus divs and nobody is going to rock the boat once the Fed delivers its decision.

The bulls win the day, week, month, year (decade?).  Momentum is the major force in the market.  How much money is going to get long before/as we all start talking about the January Effect?  If I’m right and today was a squeeze, it’s not about to end anytime soon.

I wish I were a levered-up bull.  They have the life.  I’d join them if I weren’t so nervous.

See you tomorrow,