2. Why Time the Market, and Can It Be Done

Until recently, academia believed that the stock market could not be “timed.” This was because the widely accepted belief in the Efficient Markets Hypothesis (EMH) precludes any possibility of anticipating market changes in direction. Indeed, “direction” itself is disregarded as inconsistent with randomness in prices. The EMH holds, among other things, that investors act rationally and that they immediately discount all news in the marketplace. This theory disregards all the evidence and widely accepted understanding about how investors are always optimistic at market tops and pessimistic at market bottoms. This hypothesis also implies that the marketplace can change direction only on new news, information ...

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