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 own the morning, bears own the afternoon. Not much happened in the news and data was uninteresting. It was another market day without much in the way of fundamental changes to the investing landscape. That leaves us staring at the US treasury yields and the various moving averages of the S&P 500…. It’s the same-old same-old. The only thing noteworthy is that the tape climbs consistently from the open until midday and then slides consistently until the close.
I remember a very strong & similar intraday pattern a couple years ago. The morning and the afternoon were distinctly different trading sessions. One can never prove the underlying reasons for these differences but the best guess was that European trading influenced the morning and domestic investors controlled the afternoon.
Back in the day, the mornings were weak and the afternoons were strong. Now it appears reversed.
There’s not much meaning to take away from this hypothesis (assuming it’s correct). It could reflect relatively loose monetary policy in Europe versus the US… it could just be that there’s a psychological difference between the investor populations…. It could mean something… It could mean nothing.
Setting aside interpretation…the reality is that the trading session is bifurcated. The morning and the afternoon are essentially two separate sessions. If you’re going to make intraday decisions, *you must make two, a pre-lunch and a post-lunch.*
It’ll be dangerous to just assume the bulls will be rocking in the morning and the bears later… that’s not the point I’m making. The point is that the two time periods are disconnected. Forget bulls and bears for the moment. It’s Europe and the US - and they aren’t permanently stuck in the bull and bear camps either. They will change sides but they won’t necessarily change together.
So for the foreseeable future, ask yourself:
What’s the European influence/psychology?
What’s the US influence/psychology?
They are not in sync and they’re driving the intraday action.
See youtomorrow
,-Mike