Bob Farrell's Ten
Market Rules to Remember
1) Markets tend to return to the mean over time. This is especially noteworthy now, for the
housing market is returning to its mean by plunging, as are equity market, the dollar, the Yen, et
al.
2) Excesses in one direction will lead to an opposite excess in the other direction. They
always do, and the excesses of the housing bubble and excessive, lenient bank lending, are
living way to the housing collapse and inordinately tight lending practices.
3) There are no new eras — excesses are never permanent. And how strongly does that
speak to us now, for the supposed era of unending housing price increases and of globalisation
has given way to weak housing and growing protectionism.
4) Exponential rapidly rising or falling markets usually go further than you think, but they
do not correct by going sideways. Markets correct by going in the opposite direction, falling
sharply after sustained, broad rallies, and rallying after sustained broad weakness. The world
ebbs and the world flows; it has always been thus, and shall always be thus.
5) The public buys the most at the top and the least at the bottom. Of course they do; they
always have and they always shall. The public buys when euphoria reigns, and it sells when
depression does years later.
6) Fear and greed are stronger than long-term resolve. We are human beings dealing with
rational and irrational markets; to believe that "fear" and "greed" can ever be lost is naive for they
are the most fundamental of human traits.
7) Markets are strongest when they are broad and weakest when they narrow to a handful
of blue chip names. Just as volume must follow the trend, so too must good markets have broad
support and weak markets have broad weakness... and at the moment, the market is very, very
broadly weak.
8) Bear markets have three stages — sharp down — reflexive rebound —a drawn-out
fundamental downtrend. This really is how this bear market shall end; not with a hoped for "V"
bottom, but with a great washing-out... a capitulation... and then months, or even years, of base
building.
9) When all the experts and forecasts agree – something else is going to happen.... or as
we like to say, "When they are yellin', you should be sellin,' and when they are cryin,' you should
be buyin.' "
10) Bull markets are more fun than bear markets.... or as a friend of ours from Raleigh, N.
Carolina used to say many years ago, "Bears don't eat; bulls party!"
Bob Farrel's 10 trading rules
Started by
Chilidawgz
, Jun 27 2011 02:14 AM
No replies to this topic
#1
Posted 27 June 2011 - 02:14 AM
Anything can happen...what's happening now?
No one can forecast the future. No one.
All stocks (ETF's) are BAD...unless they go up - William O'Neil
When The Time Comes To Buy or Sell, You Won't Want To - Walter Deemer