Why the Market Is Irrational and What You Can Do About It

http://finance.yahoo.com/blogs/breakout/harvard-teach-investing-111707627.html

Market Behaviour: Bull Runs

Sometimes you'll hear commentators say the bulls are running.  When you hear that, be very cautious.  Stocks are likely overpriced.

A bull run is the best time to sell stocks you own and take your profits, but only if you're ready to sell your stake in the company.  If you plan to hold a stock for years, don't feel obligated to sell it just because the bulls are running.

You'll be watching a lot of people just starting to get into a market.  People who are not intelligent investors tend to get caught up in the excitement of the market and think it's safe to get their feet wet.  Unfortunately, these folks buy stocks at the high and, when the bears return, sell stocks at the low when they get scared.

As a value investor, you've likely bought your stock on sale and now you're seeing some great profits.  You may or may not want to sell.  Run a quarterly analysis of the stock you hold, and be sure it still fits with your criteria for holding a stock.   You can design a strategy that works best for your based on your goals, your risk tolerance and your financial resources.

Related topics:

Market Behaviour: The Least You Need to Know
Market Behaviour: Crowd Impacts on Stock Prices

Market Behaviour: Can You Beat the Market?
Market Behaviour: Bull Runs
Market Behaviour: Bear Stalls
Market Behaviour: Pendulum Swings (Volatility)
Market Behaviour: Irrational Exuberance
Market Behaviour: Unjustifiable Pessimism
Market Behaviour: Control Yourself (Patience)

Typically a bull market will accelerate at the beginning and end of the cycle

To hold or to sell? Holding should occur only if no tests for selling are failed.

To hold or to sell?

In any discussion of holding versus selling stocks, the circumstances under which it is best to sell should be outlined first.  Holding should occur only if no tests for selling are failed.

The company-related reasons to sell are:

1. Sell if the news cannot get any better.
2. Sell if things did not go as planned.
3. Sell when the broker's advice goes from 'buy' to 'hold.'
4. Sell if company fundamentals are getting sick.
5. Sell on the rebound in the aftermath of material, unexpected or discrete bad news.
6. Sell in certain cases when expected news is delayed.

The market-action reasons to sell are:

1. Sell when the stock reaches the target.
2. Sell on an unsustainable upward price spike on big volume.
3. Sell when a portfolio shows all gains.
4. Sell if the stock is lazy money and likely to stay that way.
5. Sell using above-market limit orders, letting the market come to the investor.
6. Sell with a stop-loss order, but never remove or lower it.

Investor-related reasons to sell are:

1. Sell if the stock would not be bought again today.
2. Sell after gloating or counting the chips.
3. Sell rather than hope against hope for a 'maybe' bailout.
4. Sell and step aside on a personal losing streak.

If an investor sells stocks in a disciplined manner using the signal above, he is likely to end up with a good deal of cash before the market moves into a bear cycle.  Relatively few of his holdings will fail to hit one of  the 16 triggers noted in those lists above.  Those stocks that do survive will tend to be high-quality growth issues that have continued to perform fundamentally and have not run up to unreasonable price levels.  Some experts refer to these as core holdings or 'businessman's risk' foundation stocks.  They are stocks that have given consistent indications they can be held through good and bad in the market.

All other stocks will have become sales before a panic bottom because:

1. They worked as planned.
2. They acted too well for a brief period of time.
3. They got unreasonably priced.
4. They were wasting the time value of money by going nowhere.
5. They developed significant fundamental problems. 

Very few stocks can escape all those screens for a long period.  So if an investor is cashing in as prescribed and if his buying discipline rejects new positions when valuations get too pricey, he ends up still holding very few stocks as the market get toppy.  That, of course, protects his capital.

There are two major price-driving forces:

• fundamentals (which control the long term) and 
• psychology (which rules the short and medium term).

The fundamental and psychological factors affect stocks in both directions.  And as an overlay, understand that they can affect a stock either

• directly (because of the company behind the stock itself) or
• indirectly (because the market trend is so strong that virtually no stocks can buck it).  

However, the indirect effect is much stronger on the downside than on the upside:  fear is a more powerful driver than greed.

How to Identify Stock Bull Market Tops

Many Symptoms occur When Bull Market is at Major Top .These are given below

1. Yearly High of Stock Index much higher than Previous year’s High

2. Now of Shares hitting new High as percentage of Total Shares Climbs new peak

3. Very Fast upsurge in Stock prices and indices

4. Near unanimous view of Experts that This is Start of biggest bull in History

5. General Magazines Which Do not Care About Stock Markets in Normal time, puts bull run in Cover Story

6.New Theories to justify high prices, in 2008 we had the Decoupling Stheory

7. A Sea of New Investors enter the Stock market with Dreams of instant Rich

8.Market Stops reacting to Good News


http://nse2rich.com/how-to-identify-stock-bull-market-tops-are-sensex-nifty-near-the-top/

So these were the Symptoms.

Are we at Top of 2010 now or is This Bull market still Alive?

Are We are Still Quite Far From Bull market top?

What will be your decision?

What are your actions: staying invested, rebalancing or divesting partially or divesting totally?

But then you will be timing the market, a dangerous strategy too!