Bulls and Bears

You often hear the terms bull market and bear market when reading newspapers or attending gatherings about the stock market. What does it mean and why is it being used to refer to market's movement?

According to Investopedia, there is a Bull Market when there is a presence of "optimism, investor confidence, and expectations that strong results will continue." On the other hand, a Bear Market is a condition wherein "prices of securities are falling and widespread pessimism causes the negative sentiment to be self-sustaining". The standard measure uses 20% of advance or decline rally. In simple terms, there is a Bull or Bear Market when there is an extended period of consistent rise or fall on prices of stocks in the financial market. This should not include short term rallies of less than two months, as this are deemed normal movement in prices. Before you get excited and change your position two thing should be considered: Is it consistent and is it happening on an extended period?

Many analysts say that the Philippines is enjoying a Bull market these past months. 

The graph shows PSEi's share price for the past year. The downward movement around September and October last year was mainly due to the Greek debt crisis which had all indexes around the world negatively affected. Despite some analysts saying that it was a bearish period back then, I personally did not think that was the case as it only lasted a little more than two months and the market was more driven on sentiments and what if scenarios rather than actual data. 

PSEi's performance had much improved since then, thanks to solid economic growth and many companies hitting or surpassing income forecasts. I think it is a legitimate bullish run, but all indications also point that it is nearing its end. September and October are widely considered light trading months, where most market participants take a breather and assess their positions before eventually committing to their chosen stocks to close the year. We will likely see PSEi's performance dip a bit with a sideways movement at best. This opens up a great opportunity to buy as stocks will be on bargain. We just have to keep a watchful eye on news that may drive the market in either directions.

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