Ep. 291 Why Minervini Calls Volatility A Rare Moment For This Market
Investing With IBD
Deep Dive
Why is volatility considered a rare moment in the current market?
Volatility is unusual at market highs, which is rare. The VIX, a measure of market volatility, is at levels typically seen during corrections, not during rallies to new highs. This creates a challenging environment for investors.
What does Mark Minervini suggest about the current market environment?
Mark Minervini believes the market is still in a bullish phase, supported by seasonality and the presidential election cycle. However, elevated volatility around breakouts makes it harder to stay in winning positions.
How does Mark Minervini handle high volatility in stocks?
Minervini tightens his stop-losses during high volatility, reducing position sizes to manage risk. This approach allows him to take smaller losses while maintaining larger positions when he's right, creating asymmetric leverage.
What is Mark Minervini's view on the current IPO market?
Minervini sees increased IPO activity as a positive sign, indicating a healthy market. However, he warns that frothy IPOs, like those seen in 2021, can signal a market top. He prefers IPOs that come out of bases and show strong relative strength.
What is Mark Minervini's stance on AI stocks?
Minervini is cautious about AI stocks due to excessive optimism and high valuations. He believes the market may have already priced in future earnings, making it difficult for AI stocks to outperform unless they deliver exceptional results.
How does Mark Minervini define an 'easy dollar' environment?
An 'easy dollar' environment is one where the market rallies with low volatility, allowing for high alpha (returns) with low standard deviation (risk). This makes it easier to make money with less risk.
What is Mark Minervini's approach to handling stock breakouts with volatility?
Minervini prefers to tighten stops and reduce position sizes during volatile breakouts. This allows him to take smaller losses while maintaining larger positions when the stock performs well, creating a lopsided risk-reward scenario.
What does Mark Minervini suggest about the current sentiment in the market?
Minervini notes that sentiment is not yet at frothy levels, with the Investors Intelligence Bull Ratio at around 57%. However, he warns that above 60% could signal danger, especially if combined with other frothy indicators like high IPO activity.
How does Mark Minervini view the small-cap and mid-cap market?
Minervini believes the mid-cap market is showing better signs of strength than small-caps. He expects a rotation from mega-caps to mid-caps and small-caps, which would be a healthy development for the market.
What is Mark Minervini's take on the utility sector (XLU)?
Minervini notes that the utility sector's strength, as represented by XLU, is unusual during a market rally. He attributes this to the sector's defensive nature and potential interest in nuclear energy plays, which are gaining attention.
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