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

No fear. The bulls are throwing their weight around just like in January and they have zero concerns about the risk of the market. Capital flow was quite light today at 90% and some of the macro data was weak, January new home sales was a huge miss (-7.8% vs +3.5% est & -7.6% prior revised from -9.3%). The treasury market was pretty dull and yields didn’t swing around much today. All that being said, the bulls continued to push the tape up today. The real push higher occurred in the afternoon, so maybe it’s the domestic investor base that is most energized to get longer with the S&P still below the all-time highs.

The US equity market is trying its best to forget/ignore/whitewash the events of early February. For the moment they are succeeding. How much more mojo can they bring to bear? That’s a particularly interesting question to me. There is a large and powerful group of US equity investors who are plowing money into equities despite the shot-across-the-bow warning we all saw a few weeks ago.

I’m seeing it (the rapid correction) brushed aside by the bulls and the financial press as just the quirky result of an esoteric product implosion (the VIX trade complex). I think all those parties are confusing themselves and here’s my thinking

  • The VIX complex was a canary
    • It died (not really, but just go with me on this analogy)
  • So investors thought the market was dangerous, freaked out, and fled
  • The market didn’t completely collapse and investors are going right back
    • They say the canary was to blame (it was sick already or too delicate)
  • *therefore* it’s safe to go right back in
They are ignoring that *

maybe

* the canary was correct. There is a disregard for the potential danger. That, too me, is a very worrisome situation. At this point, I feel like the Boy Who Cried Wolf. Let’s talk about

tomorrow

. The event on the horizon that matters most will be the new Fed Chair’s (Jerome Powell) testimony to the House Financial Services Committee

tomorrow

at

10 AM

and his testimony to the Senate Banking Committee at the same time

Thursday

.

Bond and currency markets will be paying close attention to gather and/or infer information about the Fed’s hiking path and economic outlook. Equity investors don’t appear too concerned with any of that lately but they will be forced to care if bonds and currencies react strongly. We’ll just have to see how the cookie crumbles.

See you

tomorrow

,

-Mike