Posted On: 2007-01-03
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Welcome to on-demand radio with The Market Guys. This is AJ Monte and I have with me Rick Swope, and we're here to talk about the tenets of doubt theory. Rick, there's six of them, what's the first one you talk about most in most of these seminars.
Well, one of the first things AJ that comes up is the fact that the markets, or the averages discount everything. And that, basically what we're talking about here is that the market reflects all available information. Everything that's known, all the news, all of the background trading, that's all reflected in the price. And of course, that's more true now than it's ever been because of the rapidly distributed information via the Internet.
Absolutely. People still think though that they're getting the news first before the institutions, and as fast as the Internet is, and as good as the technology is, the institutions are very much on top of what's happening with the money flow. So if you think you're going to beat the institutions, that's not what we're talking about here. We're talking about how there really isn't any surprises in price because the general consensus of the overall market, which is me, you, our audience and everyone who trades the market, is that there's a trend, and that's what we're following, and that's what the other tenets focus on the most, is following the trends.
And one of the reasons why this is so important is because people are always looking for a leg up, they want to know the news, and you know AJ, when we talk to audiences in our live seminars, one of the things that we emphasize to them is follow the price, follow the volume. Well why do we emphasize that? It's simply because the price and the volume based on this tenet of doubt theory, the price and the volume will reflect this. You don't have to know that IBM is opening up a new market in Latin America, for instance. You don't need to know that perhaps maybe you didn't catch the news item that a company has adjusted their earnings. But what can you catch? Well you certainly can catch the move in the price because enough other people know that news, and are trading around that news, and so this is where this point comes up at such an important topic. The markets are going to reflect this.
You know, I really can't think of a better time to talk about doubt theory than our very first broadcast for the new year. 2007 is going to be an incredible year, from what I'm seeing already in volatility for the option traders, you know increased volatility is translated always into more profits for the option traders, especially those who are selling option premiums. But for the equity trader who's looking to capture profit from a trend, you know we've spoken about the January effect rally. Here it is Tuesday, January 3 the first trading day of the year, and the markets are up as we record this session. Who knows if it's going to continue up, but we do know that there are certain patterns in that these trends reverse from time to time, and as long as we're following the signals, we'll be able to...