The Zigmont Report (Daily Market Recap for 2/21/18)

Mike Zigmont

Mike Zigmont, author of the Zigmont Report, is a partner at New York-based Harvest Volatility Management, a hedge fund with over $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

Bulls versus yields.  Premarket futures were flat but bulls got to work as soon as the market opened and pushed the tape up 10-15 handles.  News and data in the morning was unremarkable.  The data that should’ve mattered was the January existing home sales (5.38 mm vs 5.6 mm est & 5.56 mm prior revised from 5.57mm).  It was substantially weaker…but nobody cared.  C’est la vie.

For the rest of the session, investors were looking ahead to the release of the Fed minutes.  The minutes came out and the buyers went to work with another push.  The S&P was +30 near the highs….  The Fed minutes weren’t very interesting (to me).  The bulls were seeing Goldilocks conditions in the comments.  The bears were seeing more aggressive hikes….

Obviously if both camps were seeing what they wanted to see.  The reality is most likely that the minutes were actually ambiguous and could be interpreted according to one’s existing view.  I’m getting off topic.

Just when it looked like the chart-watching, dip-buying bulls would own the day, interest rates broke higher.  Here’s the picture of the 10-year treasury yield intraday.  Can you spot the moment when rates finally mattered to stocks?  LOL

3% on the 10-year is a significant psychological level and obviously there are cross-market triggers at work along the way too.  I wonder how big the sell programs will be when 3% actually trades.

The dynamics of the day make me think that the two camps of bulls and bears are currently motivated by two separate conditions.

The bulls are pushing based on the chart.  The bears are pushing based on interest rates.  That’s the lay of the land for the moment.  Until we get a new bit of news/data that becomes the focus of the moment, we have our battlefield outlined.

See you tomorrow,