The Big Q: What is a Bull Market?
The Big A: A Bull Market is Not a bubble.
A Bull Market is the condition of a financial market of a group of securities in which prices are rising or are expected to rise.
The term “Bull Market” is most often used to refer to the stock market, but can be applied to anything that is traded, such as bonds, real estate, currencies and commodities.
Because prices of securities rise and fall continuously during trading, the term “Bull Market” is reserved for extended periods in which a large portion of security prices are rising.
Bull Markets tend to last for months or even years, as the 1 we are experiencing now that began on 9 March 2009, and in the longest in history.
Bull Markets are driven by optimism, investor confidence and expectations that strong results should continue for an extended period of time.
It is difficult to predict consistently when the trends in the market might change. As part of the difficulty is that psych effects and speculation often play a large role in the markets.
There is no specific and universal metric used to identify a Bull Market.
Nonetheless, perhaps the most common definition of a Bull Market is a situation in which stock prices rise by 20%, usually after a drop of 20% and before a second 20% decline.
Bull Markets are difficult to predict, but analysts only recognize this phenomenon after it has happened. Though I predicted this 1 on my radio show precisely at 1:00p EST on 9 March 2009, when all 3 major US market indicators hit my support marks at the same time reversed and bounced.
Another notable Bull Market in recent history was the frame between Y 2003 and 2007. During this time frame, the S&P 500 increased by a significant margin after a previous decline, and then as the 2008 financial crisis took effect, major declines occurred again after the Bull Market run.
Investor confidence tends to climb throughout a Bull Market period. The overall demand for stocks will be positive, along with the overall tone of the market.
That does not mean what people here from talking heads and pundits in the financial media, that is Noise.
Some of the Key factors above are more easily quantifiable than others. While corporate profits and unemployment are quantifiable, it can be more difficult to gauge the general tone of market commentary aka the Noise.
Supply and demand for securities will go up and down: supply will be weak while demand will be strong. Investors will be eager to buy securities, while few will be willing to sell. In a
Bull Market, investors are more willing to take part in the market in order to gain profits i.e. assume risk.
Riding the Bull: Investors who want to benefit from a Bull Market should buy early or in the case of this 1, buy in on the confirmation of the end of a consolidation, aka correction, in order to take advantage of rising prices and sell them when they have reached a peak, these points a determined by expert technical analysis, as an example this recent correction off of the September/October highs finished on Christmas eve on a Key reversal that has been confirmed by heavy volume and a 10.4% run North on the S&P 500 to date into earnings season that begins in earnest this week with the hammered big banks reporting, we are watching, JPM, C, MS, and WFC.
Because it is difficult to assess the state of the market as it exists all strategies imply degree of risk, and hence risk management.
There is no Magic, there are no Secrets.
Professionals in the managed money field have the tools, take their time and are dedicated as it is not a fee based business, it is performance based
And professional-grade investing skills can have a life changing effect on their clients.
Money is made constantly in the markets, the Key is to always take what the market gives with no emotion, and know that there will always be a trade.
Have a terrific weekend.