Spend, Save and Invest Smartly

Primary Market Trends



Bull market

A primary trend has wide-ranging support throughout the entire market or market sector and lasts for a year or more. A bull market tends to be connected with increasing investor confidence, motivating investors to buy in expectancy of future price increases and future capital gains. In unfolding financial market behavior, the largest group of market participants is often referred to, symbolically, as a herd. This is particularly significant to participants in bull markets since bulls are herding animals. A bull market is also occasionally described as a bull run.

Bear market

India's BSE Index SENSEX was in a bull run for approximately 5 years from April 2003 to January 2008 as it increased from 2,900 points to 21,000 points. Another prominent and recent bull market was in the 1990s when the U.S. and many other global financial markets rose rapidly. A bear market is a firm drop in the stock market over a time period. It is described as being accompanied by common pessimism. Investors anticipating additional losses are often motivated to sell, with negative feeling feeding on itself in a ferocious circle. The most renowned bear market in the past followed the Wall Street Crash of 1929 and lasted from 1930 to 1932, marking the start of the Great Depression. A milder, low-level, long-term bear market took place from about 1973 to 1982, encircling the stagflation of U.S. economy, the 1970s energy crisis, and the high unemployment of the early 1980s.

Prices oscillate constantly on the open market. To take the instance of a bear stock market, it is not a straightforward decline, but a substantial drop in the prices of the majority of stocks over a defined period of time. According to The Vanguard Group, "Despite the fact that there’s no agreed-upon definition of a bear market, one generally accepted measure is a price decline of 20% or more over at least a two-month period."

Market bottom

A stock market bottom is a tendency reversal - the end of a market downturn and the beginning of an upward moving trend. "Bottom" is further than just a recent low in a stock market index, but it is a reversal of the primary trend. A "bottom" may occur because of the occurrence of a "cycle," or because of "panic selling" as a reaction to an adverse financial development.

It is very complex to identify a bottom (referred to by investors as "bottom picking") as it is occurring. The upturn subsequent a decline is often short lived and prices may resume their decline. This would fetch a loss for the investor who purchased stock(s) during a misperceived or "fake" market bottom. Some of the more distinguished market bottoms, in terms of the closing values of the Dow Jones Industrial Average (DJIA) include :

1. Black Monday : The DJIA touched a bottom at 1738.74 on 10/19/1987, as a result of the decline from 2722.41 on 8/25/1987.

2. The bursting of the Dot-com bubble : A bottom of 7286.27 was reached on the DJIA on 10/9/2002 as a result of the decline from 11722.98 on 1/14/2000. This incorporated an intermediate bottom of 8235.81 on 9/21/2001 which led to an intermediate top of 10635.25 on 3/19/2002.

3. A down turn associated with the Sub prime mortgage crisis starting at 14164.41 on 10/9/2007 (DJIA) and caused a short term bottom of 11740.15 on 3/10/2008. After a rallying to an impermanent top on 5/2/2008 at 13058.20 the primary trend of the declining, "bear" market, resumed.

Capital Markets