Bull Market Vs Bear Markets: Introduction to the Stock Market

Bull Market Vs Bear Markets: Introduction to the Stock Market

Been a while Frugal folk, but in light of recent market activities and with me being bored at work since school is out until January, I decided to give you newbies an introduction to the learning about the stock market.

In my opinion, we will always need oil. Maybe not as much be it definitely will not disappear in our lifetime.With the recent decline in oil prices and shares I believe that oil will not stay this cheap for long. Many OPEC members cannot fund budgets with oil prices below $100, especially not at $50. Eventually OPEC will be forced to cut production which will boost oil prices again. Also, with oil prices so low, US shale producers will be forced out of business which will reduce supply and give oil prices a boost. Take that how you want and with a grain of salt. There's definitely a higher game of chess better yet monopoly going on. But anyhow....

First off: The stock market is usually described as being in two types of trends: A Bull market or a Bear market. For simplicity and ease of understanding: “Grab the Bull by the horns, run from the Bear”

**DISCLAIMER**

Let me emphasize here that despite the analysis that will be given below, the stock market is seldom a feast or famine affair. Just like any other industry there is a science both mathematical and social behind it, whether logical or illogical. There are stocks to buy in very bad markets, just as there are stocks to sell when the sky is looking the clearest.  This analysis is intended to make you aware of extreme danger signals and of exceedingly attractive opportunities like solar energy (*shameless plug*). “Everything is relative” and successful investing results from having knowledge, information, and insight.

Bull Market:

If the trend is on the buy side, then the market goes up and we have what is called a “bull market”.

Bull markets usually last twice as long as the declining Bear trends. However, booming business cannot last forever, it is important to know what warning signs to watch for during the last stages of a bull market aka when you need to get your money out.

Characteristics of the Final stages of a bull market:

1)      Business is usually very good near the top of a market.

2)      Investors are enthusiastic and full of confidence

3)      Wide public participation. Number of stockholders in the country takes a sudden spurt. Way more buyers than sellers.

4)      Stock splits are commonplace.

5)      Bonds are yielding way more than stocks.

6)      Bond prices fall sharply

7)      Key stocks in the market begin to fade and sell off

8)      The market doesn't react, as it used to, to good news.

-When you begin to spot these factors it might be time to start taking a conservative approach to your investing plan. Don’t be greedy and try to extract the last ounce of profit from a diminishing market!

Bear Market:

If people are altogether pessimistic and are mostly on the sell side, stocks go down and we have a “bear market”.Bear markets can last anywhere from one to five years from a historical standpoint. With that being said, it is potentially advantageous if one can get into the bear market in its final stages before it switches into a bull market. 

Characteristics of the Final stages of a bear market:

1) A sharp decline in blue chip stocks is a sign that the end of the bear market is approaching. As the decline comes to an end there are real bargains in the market.

2) The market becomes resistant to bad news (announcements that used to cause stocks to sell now have no effect.)