The tendency of a financial market to move in a specific direction over a period of time is called market trend. There are people who are interested in the type of market movement, try to identify the given type of trend and its further continuation.
The trends can be classified according to time frames. Market trends for long time frames are called secular. A secular market trend may last as long as 25 years. It consists of a series of primary trends.
The market trendsfor medium time frames are referred as primary. A primary trend which gains a broad support in the entire market usually lasts for a year or more.
The other type of market trends is the secondary one which concerns toshort time frames. The overall duration of this trend reaches from a few weeks to a few months. A certain type of secondary market trend is known as a market correction. It’s a downward movement which is not so large to be considered a bear market.
The terms “bull market” and “bear market” stand for identifying the upward and downward market trends, respectively. They are used for describing the general actions and sentiments of either thewhole financial market or certain sectors and securities. The bear market indicates the decline of prices of a single security or asset,and the securities market as a whole. On the other hand the bull market describes the market in which prices rise.
Before passing to the detailed explanation of theconcepts of bull and bear markets it would be worthy mentioning the origins of these expressions.
The most popular explanations given are the following:
- It is thought that the terms “bear” and “bull” derive from the way the animals attack their opponents. Bulls in order to attack their opponents thrust their horns up into the air. Conversely bears in such situations swipe down. Those actions over a period of time were metaphorically associated with the market movement. Naturally, a bull market stands for the upward market, and the bear market indicates a downward trend.
- By the early 18th century men would sell the bear skins they had yet to receive. Thenhoping that the price of the skin would drop they would speculate on the future purchase.These men were referred as bearskin jobbers and for short they were called “bears”. In the same way the term derived for describing the downward trend in the market. Now a logical question is bound to arisehere: “what is the relation between bear and bull?” Due to the once-famous blood sport of bull-and-bear fights bears and bulls were considered opposites. So, if the term bear stands for a downward trend then the term bull will stand for the opposite direction, i.e. upward.
Now as we promised let’s analyse the details of bear and bull markets.
A bull market generally starts before the economy indicates exact signs of recovery.During such amovement in the financial market the prices of securiries are rising or are expected to rise. The characteristic features of bull markets are optimism and that the strong results will continue. Though this market mostly refers to stock markets, it can also be applied to anything which is traded, including bonds, currencies and commodity CFDs.
Bullish market; June 2006-June 2007
A bear market shows the general decline in the market over a period of time. If the bull market is characterized by optimism then the bear market is featured by pessimism. The prices of securities are falling in such market condition,and the pessimism causes the negative sentiment to be self-sustaining.
Bearish market; April 2008-May 2009