Market trends

Primary market trends

Bull market

A bull market tends to be associated with increasing investor confidence, motivating investors to buy in anticipation of further capital gains. The longest and most famous bull market was in the 1990s when the U.S. and many other global financial markets grew at their fastest pace ever.

In describing financial market behavior, the largest group of market participants is often referred to, metaphorically, as a herd. This is especially relevant to participants in bull markets since bulls are herding animals. A bull market is also described as a bull run. Dow Theory attempts to describe the character of these market movements.

Bear market

A bear market tends to be accompanied by widespread pessimism. Investors anticipating further losses are motivated to sell, with negative sentiment feeding on itself in a vicious circle. The most famous bear market in history was the Great Depression of the 1930s.

Prices fluctuate constantly on the open market; a bear market is not a simple decline, but a substantial drop in the prices of a range of issues over a defined period of time. By one common definition, a bear market is marked by a price decline of 20% or more in a key stock market index from a recent peak over at least a two-month period. [citation needed] However, no consensual definition of a bear market exists to clearly differentiate a primary market trend from a secondary market trend.

Etymology

The precise origin of the phrases "bull market" and "bear market" is obscure. The most common etymology points to London bearskin "jobbers" (brokers),[citation needed] who would sell bearskins before the bears had actually been caught in contradiction of the proverb ne vendez pas la peau de l'ours avant de l’avoir tué ("don't sell the bearskin before you've killed the bear")—an admonition against over-optimism [citation needed]. By the time of the South Sea Bubble of 1721, the bear was also associated with short selling; jobbers would sell bearskins they did not own in anticipation of falling prices, which would enable them to buy them later for an additional profit.

Some analogies that have been drawn, but are likely false etymologies:

* It relates to the common use of these animals in bloodsport, i.e bear-baiting and bull-baiting.

          o It refers to the way that the animals attack: a bull attacks with its horns from bottom up; a bear attacks with its paw from above, downward.

          o It relates to the speed of the animals: bulls usually charge at very high speed whereas bears normally are lazy and cautious movers.

* They were originally used in reference to two old merchant banking families, the Barings and the Bulstrodes.

* Bears hibernate, while Bulls do not.

* Bears keep their chin up, while Bulls keep their chin down.

* Bear neck points down while Bull's points upwards.

Another plausible origin is from the word "bulla" which means bill, or contract. When a market is rising, holders of contracts for future delivery of a commodity see the value of their contract increase. In a falling market, the counterparties--the "bearers" of the commmodity to be delivered, win because they have locked in a price higher than the present for future delivery.

Copyright 2008 - France BtoB from Wikipédia