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Secret 2

When a market is cheap or a market is expensive, there probably is a good reason

This one goes hand in hand with “don't buck the trend.” Livermore would tell us that he always made money selling short low-priced markets, which are the public's favorite and in which a large long interest had developed. Alternatively, he cashed in on expensive markets when everyone was bailing out, because the public thought the market was high enough for a healthy reaction. The public was selling soybeans short at $6 per bushel in 1973, because this was an all-time high and into resistance. Who could have guessed that soybeans weren't even halfway to what would be record highs—close to $13? Always remember that it is not the price that's important, it's the market action.


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