Understanding the Stock Market - Bull and Bear Markets.

Bull & Bear Markets Simply put, bull markets are movements in the stock market in which prices are rising and the consensus is that prices will continue moving upward. Bear markets are the opposite - stock prices are falling, and the view is that they will continue falling. The economy will slow down, coupled with a rise in unemployment and inflation. Investors who think and act as though the market will continue to rise are bullish, while those who think it will keep falling are bearish. What Drives Bull and Bear Markets? What causes bull and bear markets? They are partly a result of the supply and demand for securities. Investor psychology, government involvement in the economy and changes in economic activity also drive the market up or down. These forces combine to make investors bid higher or lower prices for stocks. To qualify as a bull or bear market, a market must have been moving in its current direction (by about 20% of its value) for a sustained period. Small, short-term movements lasting days do not qualify. Bull and bear markets signify long movements of significant proportion. The longest-lived bull market in history is the one that began in 1991 and ended in 2000. Other major bulls occurred in the 1920s, the late 1960s and the mid-1980s. However, they all ended in recessions or market crashes. The best-known bear market was, of course, the Great Depression. The Dow Jones Industrial Average in the USA lost roughly 90 percent of its value during the first three years of this period. There were also numerous others throughout the twentieth century, including those of 1973-74 and 1981-82. Predicting Bull and Bear Markets. In their attempts to predict the market, economists use technical analysis. Technical analysis is the use of market data to analyse individual stocks and the market as a whole. It is based on the ideas that supply and demand determines stock prices and those prices, in turn, also reflect the moods of investors. One tool commonly used in technical analysis is the advance-decline line, which measures the difference between the number of stocks advancing in price and the number declining in price. Each day a net advance is determined by subtracting total declines from total advances. This total, when taken over time, comprises the advance-decline line, which analysts use to forecast market trends. Interested in this subject? Try this link for more of the same