A Sober Quote For All These Recent Market Highs: The 3 Stages Of A Bull Market

Jul. 03, 2014 2:14 PM ETSPY1 Comment
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It's worth repeating. Stock prices won't rise forever:

Very early in my career, a veteran investor told me about the three stages of a bull market.

Now I'll share them with you.

• The first, when a few forward-looking people begin to believe things will get better

• The second, when most investors realize improvement is actually taking place

• The third, when everyone concludes things will get better forever

(Book Source for the Quote: The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor, Howard Marks)

I think we are past stage 2 and headed towards stage 3. But it's difficult to estimate the stage 3 timeframe even for the most experienced investors and traders.

Be cautious and use trailing stop losses for long positions at these levels remains my personal advice.

A good gauge when stage 3 is near: Rising interest rates mixed with higher volatility (absent any catastrophic, high-impact event that could turn the markets to the downside faster of course).

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