The Making of a Bull Market

“History repeats again”, an old adage shunned by the market theorists most of the time, but in reality it is truth. It is human minds that work at the markets, so it is common knowledge that greed and fear move up and down in tandem to repeat the process again and again. Technical analysis is based on this theory, and it has been proved that it works perfectly well.

Again there is no 100% guarantee for the concepts to work, there are chances of failures and hence you have to protect your capital with stop losses. The common symptoms that can be observed for a market in a bear phase and in the process of changing over to a Bull market are as follows.

1. There will be no rational economic reason for the early rally.

2. The mid cap stocks or second line stocks will lead begin the rally first.

3. Every bear to bull changeover begins with the Financial Sector. If the Financial Sector stocks don't rally, there is no bull market.

4. Basic Materials usually follow in the lead. If there is no building, there is no place to stay.

5. The market pounces on any good news even if it is small and shrugs off (ignores) bad news though it can be a catastrophic one.

6. The market will gap lower and then close higher for the day. It will do this over and over again.

7. The last hour of trading is often accompanied by strong buying. This buying is usually caused by large money on the sidelines combined with panic short covering:

8. The U.S. market leads the other world markets higher. It always has and will be, until proven otherwise.

Have we observed almost all the points here in our markets now? Our markets are in a Bull phase is confirmed. Now how to trade the markets and take positions is the next question. Make a list of top ranking Industry groups now. Start tracking their stocks for a pull back to value zone and trade them on the long side with appropriate stops and quantity using the best money management rules.

No one can guarantee 100% winning trades, so use stop losses and diversify your portfolio to the extent you can manage it without losing sleep. Risks should be kept at minimum but still good enough to give your capital a considerably good return.

The Stock Markets have given riches and independence to a lot of people all around the world, not everyone, a selected few who followed its moves and approached it with discipline.