What Does Careful Look Like? and Hard Pennies

After yesterday’s post someone said to me I like bullish Howard, not bearish Howard.

I won’t argue…I like bullish Howard.

But, I don’t have a bearish side. I leave parties early and based on the price action I am seeing of late, careful Howard is in charge.

Back in July, I posted ‘Keep and Eye on The Homebuilders‘. It was not a post that said SHORT homebuilders (though that would have been a great trade). I was pointing out that if you were long, you might want to be careful and have an exit plan.

Take a look at the Homebuilders today. The Regional banks look the same and it’s most likely due to rising interest rates. Institutions are following a playbook.

I have learned to embrace the volatility, not fear it. First, it shakes weak holders out of the market. Volatility creates long term opportunities as new trends emerge in periods when the volatility subsides.

That said, I am more careful during periods of high volatility.

I love this thought from Mark MInervini on the subject:

Day traders and very short term guys love this type of high volatility market. I avoid these periods. This is what I call a “hard penny” environment. Why fight for pennies when you can simply wait for easy dollars?

When I say be careful, I mean have some perspective. I think Nasdaq 10,000 is inevitable, but Nasdaq 6,000 is surely a possibility on the way. Here is the monthly Nasdaq chart that may help give you some perspective. At Nasdaq 6,000 there would be panic, and I would like to be in position to do the opposite. That is being careful, not bearish.

If stocks start hitting new all-time highs in regular fashion over the next few weeks and months, I will resume my bullish nature.

On the optimistic side, if you draw a thick enough trend line, the S&P looks like it hit major support. Traders should have a fun week.

Ivanhoff and I will dig deeper tomorrow in Momentum Monday.

Have a great week.

Also published on Medium.