The Zigmont Report (Daily Market Recap for 8/14/17)

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 shortly after the market close.

The opinions expressed below are my own

It was a dip.  There’s little else to say at this point.  Last week injected some volatility and a fairly rapid selloff into US equities.  The brief moment of fear passed.  Investors had a weekend to look at the chart…  you know the chart…this chart…the 10 year chart:

So the itty bitty blue candle on the far right is the dip of last week.

Whaddaya gonna do with a dip?  The chart obviously gives us the answer and investors followed through.

The dip-buying behavior is so strongly reinforced for so long it will take a HUGE change in the state of the world to change that behavior (it is now a self-fulfilling prophecy).  We did not experience such a change and so here we go again.

Unless an actual war breaks out, I don’t think any dip is going to last.  So that should tell us how to play equities.  Play long but understand that there’s a rickety foundation.  At some point when stressed, it will crumble.  The stress has to be big however.  It’s going to take a war, or a recession, or a central bank hike, or some other globally massive catalyst.

In the meantime, the bulls get another chance to gloat at the bears.

See you tomorrow,