Streettalklive: Bob Farrell's 10 Investing Rules

Streettalklive.com just published an article (courtesy of Ritholtz.com) on the 10 Investing rules.  While its really more of a primer on market movements such as bear markets and mean reversion with a hint of technicals in there, its an excellent read.  There's several trends observed in there that are very relevant to our current market situation.

Except:

The 10 Rules Of Investing

1. Markets tend to return to the mean (average price) over time.

Like a rubber band that has been stretched too far – it must be relaxed in order to be stretched again. This is exactly the same for stock prices which are anchored to their moving averages.  Trends that get overextended in one direction, or another, always return to their long-term average. Even during a strong uptrend or strong downtrend, prices often move back (revert) to a long-term moving average. The chart below shows the S&P 500 with a 52-week simple moving average.

See more at: Streettalklive