How to Determine a Bull or Bear Market

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Bull and bear markets are two very different animals - in more than one way. The ability to discern whether you are in a bull market or a bear market is fundamental for traders and investors alike.

We will look at how fundamental and technical analysis can help you identify when the market is ‘nearing a turn’ and how you should look to position yourself to take advantage of this move.Positive sentiment helps fuel a Bull market and negative sentiment a Bear market.Technical analysis can help pinpoint market entry and exit points., ongoing positive sentiment and a positive economic backdrop.

Stock and share fundamentals are slightly different as they tend to be more company-focused, looking at metrics including: cash flow, dividends, earnings, return on investment and management history and competence among other considerations.Market sentiment has a very important role to play when deciding if an asset class is on the cusp of a turn or not.

Large price falls can also tempt buyers back into the market – ‘Buy the Dip’ – who then sell their position quickly when prices keep falling, again adding to negative sentiment and erratic price action. The adage remains true – ‘Don’t Try to Catch a Falling Knife’. Remember it is common to see a short-term bull move in a long-term bear market and the other way around.Technical analysis is the use of statistical analysis to help evaluate the price of an asset or market.

The first bear market started in early 2000 as the dot-com bubble burst after the extreme equity market valuations applied to a range of internet companies fell abruptly. As greed turned to fear, investors dumped stocks until the market found an equilibrium and steadied, ending the bear market phase.

 

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