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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » Four Phases of a Bull Market

Four Phases of a Bull Market

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1Four Phases of a Bull Market Empty Four Phases of a Bull Market Sat May 04, 2013 2:08 pm

sriranga

sriranga
Co-Admin
Bulls tend to thrust their horned heads upward when attacking, hence the symbolism for a stock market on the rise. Bull markets are cyclical, with four phases. Sometimes the characteristics of these phases make them easy to identify; however, as the market moves through its life cycle, the differences can become less distinct. Historically, bull markets have lasted just under 40 months, according to trader Aubrae DeBuse.

Bull Market Phases
The man Money magazine called the 20th century's "Greatest Stock Picker," Sir John Templeman, said bull markets experience pessimism, skepticism, optimism and euphoria. Another investment professional, Laszlo Birinyi, founded the Birinyi Associates money management firm on the premise that an understanding of market history and how investors think offers a successful way to select stocks and time purchases. Birinyi identifies four phases in bull markets that reflect investor attitude and mirror Templeman's thoughts: Reluctance, digestion, acceptance and exuberance.

Reluctance Phase
Market disillusionment characterizes phase one of a bull market, according to Futures Magazine. This "reluctance" phase follows a bear, or falling, market in which many sold their holdings to cut their losses. The general public has little confidence in the market even though average prices and price/earnings ratios are typically low. Institutional investors start to accumulate holdings to take advantage of the low prices.

Digestion Phase
Individual investors begin to return in the second phase of the bull market. Institutional trader, Ali Meshkati, notes that, as they recognize the potential for a bull market to develop, investors study stocks in earnest once again. Stock prices, having increased for several months, attract more interest. In this second stage, investors add to their portfolios, which pushes prices higher. Rising prices create demand and greed sets in.

Acceptance Phase
Chris Johnson writes in his Winning Edge investment newsletter that the acceptance phase is the most powerful bull market. Stock prices soar as new investors enter the market. IPOs become popular to take advantage of growing public interest in investments, while the number of corporate mergers and acquisitions, fed by the availability of capital, increases. Media coverage gives investors pointers on how to profit from market activity. Institutional investors sell the shares they bought in phase one, then move into technology and other more speculative stocks. Mutual funds benefit from investors shunning cash vehicles such as money market funds, a reflection of confidence in sustained market growth.

Exuberance Phase
The "exuberance" phase is a period of volatility, high trading volume and high expectations. Investors in this stage of a bull market become speculators who ignore fundamental performance measurements when choosing stocks. An overriding feeling that the market will continue to flourish prevails. However, the market eventually becomes crowded, leaving fewer new investors. The flow of dollars sustaining market performance begins to trickle and top-performing stocks start to drop. The bubble of this final stage bursts as investors realize the market has outpriced itself.
Source: http://budgeting.thenest.com/

http://sharemarket-srilanka.blogspot.co.uk/

2Four Phases of a Bull Market Empty Re: Four Phases of a Bull Market Sat May 04, 2013 3:31 pm

K.Haputantri

K.Haputantri
Co-Admin
Thanks Shri for sharing. ?Are we still in the first phase.

3Four Phases of a Bull Market Empty Re: Four Phases of a Bull Market Sat May 04, 2013 4:06 pm

The Alchemist


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Interesting article. Thanks Sri for sharing.

maybe we are entering the second (Digestion) Phase ? The slow run from 5400-6000 (Jan-Apr 2013) could be termed the first phase, the Reluctance Phase ?

Coincidentally, yesterday 3rd May when the ASPI closed over 6000 after 17 months, The Dow Jones Industrial Average (DJIA) hit 15,000 for the first time ! (but closed at 14,973). Also the S&P 500 closed over 1600 for the first time too (1614).

The DJIA landmark history as folls -

1000 points - 1972
5000 points - 1995
7500 points - 1997
10,000 points - 1999
14,000 points - 2007 (then financial meltdown and market crashed)
15,000 points - 2013

The ASPI Index which was 3000 points in Feb 2007 (at the height of the war and colombo bombings !) doubled to 6000 points in Jan 2010 (i think). it closed around 7000 points end dec 2010 and only went to its highest 7800 in Feb 2011 due to the Buki / Carson factor ! (why do i get that deja vu feeling now once again !)

4Four Phases of a Bull Market Empty Re: Four Phases of a Bull Market Sat May 04, 2013 4:29 pm

Redbulls

Redbulls
Director - Equity Analytics
Director - Equity Analytics
[color=red]The Alchemist wrote:
maybe we are entering the second (Digestion) Phase ? The slow run from 5400-6000 (Jan-Apr 2013) could be termed the first phase, the Reluctance Phase ? [/color]

Yap.
Good to re read.
http://forum.srilankaequity.com/t23243-there-are-3-stages-in-a-typical-bull-market?highlight=bull

5Four Phases of a Bull Market Empty Re: Four Phases of a Bull Market Sat May 04, 2013 4:37 pm

LSE

LSE
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Thank you Mate. Really good one. I think we are passing the "Reluctance Phase".

Happy Trading You All.
cheers cheers cheers

6Four Phases of a Bull Market Empty Re: Four Phases of a Bull Market Sat May 04, 2013 5:08 pm

Bond


Manager - Equity Analytics
Manager - Equity Analytics
@The Alchemist wrote:Interesting article. Thanks Sri for sharing.

maybe we are entering the second (Digestion) Phase ? The slow run from 5400-6000 (Jan-Apr 2013) could be termed the first phase, the Reluctance Phase ?

Coincidentally, yesterday 3rd May when the ASPI closed over 6000 after 17 months, The Dow Jones Industrial Average (DJIA) hit 15,000 for the first time ! (but closed at 14,973). Also the S&P 500 closed over 1600 for the first time too (1614).

The DJIA landmark history as folls -

1000 points - 1972
5000 points - 1995
7500 points - 1997
10,000 points - 1999
14,000 points - 2007 (then financial meltdown and market crashed)
15,000 points - 2013

The ASPI Index which was 3000 points in Feb 2007 (at the height of the war and colombo bombings !) doubled to 6000 points in Jan 2010 (i think). it closed around 7000 points end dec 2010 and only went to its highest 7800 in Feb 2011 due to the Buki / Carson factor ! (why do i get that deja vu feeling now once again !)


No price band
Low interest rate
Excess liquidity in the banking system



But......turnover has been driven by purchases on selected small caps (small craps?). The index was driven by foreign trading on selected blue chips. Conclusion: A lot of retailers stuck at high prices Wink

7Four Phases of a Bull Market Empty Re: Four Phases of a Bull Market Sun May 05, 2013 8:51 pm

kalum


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Thanks for sharing. I feel like we are transferring from first phase to second phase. Lets see Very Happy

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