What Does Bullish Mean in Stock Trading?

What Does Bullish Mean in Stock Trading?
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If you follow the stock market, you may have heard people speak of bull and bear markets. A bull market indicates that market prices are rising and a bear market indicates that they're falling. A bullish day in the market is one where prices are generally on an upswing, with bearish meaning they're generally declining.

Bullish vs. Bearish

A bull market is one where prices are up. Generally, the term is technically used when prices are up 20 percent above a previous market low. You can have an overall bull market, meaning broad indices like the S&P 500 or Dow Jones Industrial Average are trending upward, or you can speak of bullish stocks that themselves are significantly up above recent lows.

Bear markets occur when prices go down. Generally, the term is used in parallel with bull market and refers to a scenario where stocks are down 20 percent from a previous market high.

Bull markets in one investment opportunity might not overlap with bull markets in other arenas. For example, a petroleum shortage could bring about a bull market in oil but a bear market in stocks impacted by rising energy prices.

Bullish People and Bullish Stocks

You can say that a market is bullish, a stock is bullish or a particular market day is a bullish one, all meaning stocks or other investment opportunities are up. Similarly, bearish means that prices are down.

You can also use bullish and bearish to refer to investors themselves. For instance, you might say that someone is bullish on oil, meaning they believe that oil prices are set to rise, or you might say that the same investor is bearish on technology stocks, meaning that they believe the prices of shares in tech companies will soon fall.

Bullish and Bearish Behavior

A bullish investor will usually buy stocks or other investments, anticipating that he will be able to hold them until the anticipated rise. A bearish investor may sell existing holdings or, if possible, sell shares short, meaning borrowing them from someone else to sell immediately with the goal of buying and returning the shares when prices drop.

Some investors and market observers may be more optimistic or more pessimistic than others, and nobody can predict the market perfectly, so you can usually take any bullish or bearish predictions with a grain of salt.

Historic Bull Markets

One of the longest historic bull markets in the history of the stock market, as measured by the widely watched S&P 500 index of stocks, was from late 1987 through early 2000. During this time, the market generally rose and never dropped below 20 percent from a previous high, which would indicate a bear market.

Another long-running bull market began in March 2009, as the stock market began to recover from the lows of the recession brought on by the 2008 housing bubble collapse and financial crisis.

The 1920s was also a time known for a soaring bull market in stocks, though that came to an end with the 1929 stock market crash and the subsequent Great Depression of the 1930s.

Bear Markets in History

From September 1929 through June 1932, the stock market entered one of its most famous bear markets, heralding the start of the Great Depression and the end of the so-called Roaring Twenties economy.

The early 1980s also saw a bear market, as the Federal Reserve raised interest rates in an effort to put a stop to soaring inflation.

The period from October 2007 to March 2009 was a recent example of a bear market, as housing prices and financial institutions struggled at the end of the housing bubble of the 2000s.

Note that bull markets don't necessarily correspond to periods of overall economic growth and prosperity, and bear markets don't overlap entirely with economic recessions.