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

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’s been a while since….we’ve experienced a risk-off day.  We got one today.  It was orderly and slow but compared to the moves of the tape lately, it was large.  Capital flow was only 109% today.  This is a bit larger than normal but given the drop in prices and the increase in volatility, this is low.  My point here is that less money jumped into motion than I would have expected.  That’s probably a good sign for the bulls because it suggests calmness among investors.  Here’s a picture, tell me what you think.

Maybe it’s my misperception but I believe intraday momentum was at work today.  Premarkets were slightly down and Trump PR fallout was a focus.  Over the day the Barcelona terrorist attack and Trump’s tweets thereafter, softened the tape even further.  Any robots, or people, playing the minute-by-minute trends had obvious signals: sell it and forget it.

I don’t know if the bulls will bounce back tomorrow.  It might be too much to ask, even for the dip-buying community.  Last week Thursday was dog of a day and Friday’s response was flatish.  Maybe tomorrow is similar, maybe there’s a bit more dip coming.  As long as something major doesn’t happen, weekends soothe the dip-buyers so I think the bounce comes Monday.  This market has been a pattern-driven market.  It’s been the most strongly reinforced and longest lasting pattern-driven market I can remember.  The pattern will continue.

In the meantime, we’ve rediscovered the risk-off nature of the markets.  When risk takes center stage, equities get dumped essentially across the board while bonds and the US Dollar get bought.

See you tomorrow