Bull market volatility is alive and well.
The major indexes are consistently hitting new highs despite uncertainty and fear-filled headlines. Conflicts in the Middle East and Ukraine continue while a nail-bitingly close presidential election is days away.
But stocks are powering through obstacles, most recently overcoming a day of heavy selling this week to bounce back and continue the bull market trend.
"This is really strange," Mark Minervini, two-time U.S. investing champion and founder of Minervini Private Access, tells Investor's Business Daily's "Investing with IBD" podcast.
He points to the volatility index, or VIX, remaining at elevated levels even as the stock market shows strength. "You can see now we're hitting new highs (in the market), but the VIX is at those correction levels."
Audio Version Of Podcast
The VIX is considered Wall Street's "fear gauge," and shows expected near-term price changes in the S&P 500. While volatility typically spikes during a pullback or correction in the market, volatility has recently remained elevated as a bull market continues.
"I haven't seen that many times — if ever — in my entire career of 41 years of doing this," said Minervini. "For me to get really aggressive, I'd like to see volatility come down."
When To Get Aggressive In A Bull Market
Minervini says the wider environment doesn't need to be perfect to create a bull market.
"What can happen is you get a rotation, and get a bull market in midcaps or small caps, and that's where the alpha is and the low standard deviation while you're getting volatility in some other areas and it becomes more of a stealth continuation of a bull market," Minervini said.
A strong bull market can also mask potential problems in stocks, Minervini says. Investors should always consider the performance behind the headlines, making sure a stock's chart action supports an appearance of strong fundamental metrics.
Reviewing the charts is a key safeguard to finding the best stocks in a bull market. "If the earnings are great, the sales are great, the management is wonderful and it's the best brand or biggest company in the world, I'm not buying that stock unless the chart confirms that," he said.
Learn what happens when breakouts are coupled with unusually high volatility.
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