One of the basics of Dow Theory is the thesis of three psychological phases in both bull and bear markets. In a bull market, which we are now in, the first or initial phase is the early accumulation phase. This is the phase where wise and seasoned investors enter the market at or near the bottom, when many stocks are selling at great values after having been battered for months by the preceding bear market. Here many blue-chip stocks are selling "below known value."
The second phase of a bull market is usually the longest and most deceptive, containing many secondary reactions. During the second phase the retail public shows interest in stocks, and enters the market carefully and sporadically.
The third or speculative phase of a bull market is characterized by a wild and wooly and ever-increasing entrance by the retail public. This phase is characterized by hot tips, hype and pure ... Log in or subscribe to continue reading.
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