Richard’s Wisdom – “Richard’s Thoughts on the Third Speculative Phase”
One question I am frequently asked is, "How do we know when a bull market is topping out?" First, we must determine which sentiment phase the market is in. Normally, the stock market will only top out when it is in the speculative or third sentiment phase. Strangely, most market analysts – almost all of whom are considerably younger than I am – are not acquainted with the sentiment phases of a bull market.
Normally, following the second phase, we have a deep correction followed by a continuation of the bull market into a third and final speculative phase. From here on, the character of the third phase trumps everything else. All minor ripples in the market, all dips or pops, all of these are contained within the third psychological phase.