The Zigmont Report (Daily Market Recap for 2/9/18)

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

Everything’s faster.  The trading behaviors seem accelerated.  The market started off nicely higher and it looked like the dip-buyers that wanted to go to work at the official correction levels (S&P = 2585) were driving prices higher.

I would have guessed that the correction-level buyers would have owned the day… and maybe even carried over to another session.  Not so.  The correction-level buyers were overrun by lunch and the selling drove equities towards new lows.  The low of the day was 2532 (down 1.9%) and that printed a little after 1:30 PM.

Cue the 200-day moving average buyers.  The 200-day moving average is 2538 and the tape was getting ugly fast when that level started to get close.  We spent four minutes below that level and then rallied.  We didn’t just rally, we ripped.  The next 40 minutes was essentially nothing but upticks and the sellers only turned things around after the S&P climbed 70 handles.

The rest of the afternoon had some back and forth… and then the end-of-day bulls made their push and took us up to the highs of the day.

Those three pushes…. They used to take days.  Today they compressed their behavior into a single session.  Volume too.  Capital flow was 190%.

Maybe this is a result of more computer-driven trading and computer-held limit orders.  Maybe not.  The speed of trading is obviously faster than ever.  That’s not interesting.

What’s interesting is that the pace of the various adjustment phases is also faster than ever.  The various factions of dip-buyers aren’t acting on T+1 price signals.  They are acting intraday… and they are running out of steam intraday… and then a whole new faction goes to work… and gets tired… and so on.

I can’t draw a long-term conclusion from this except to say that the psychological transitions are now going to come faster and the sentimental states of the market are going to be briefer.

We’re going to cycle through investor emotions like we’re inside a blender.  Steel yourselves because the swings from despair to euphoria are going to be more rapid than ever.

My advice is to prepare for the speedy swings ahead of time so you don’t get sucked into behaving emotionally at the moment.

Less (action) will be more for a while.

Have a great weekend, see you Monday