bull market

Regardless of their exact beginnings and ends, bull markets typically have four phases.

In the first phase, prices are low, investor sentiment is low, and investors are pessimistic about future prices. In the second phase, stock prices, trading activity and corporate earnings begin to increase and economic indicators are above average. Investor sentiment also gets more optimistic.

In the third phase, market indexes and many securities reach new trading highs. Trading activity continues to increase, and dividend yields reach historic lows. In the fourth and final phase, there is excessive IPO activity, trading activity and speculation. Stock P/E  ratios are also at historic highs. As investors take profits or react to bad news or negative indicators, bull markets generally unravel.

Bull markets usually present a multitude of moneymaking opportunities for investors because prices generally rise across the board. But bull markets don't last forever and they don't always give advance notice of their arrival, so the investor must know when to buy and when to sell to maximize his or her profits. This means the investor must attempt to time the market, or gauge when a bull market has begun and when it is ending.

Analysts spend thousands of hours trying to determine what will trigger the next bull market and how long it will last. Technical analysis is especially prevalent in this effort, although less sophisticated indicators such as hemline fashions or the NFL division of the last Super Bowl winner also provide fodder for such predictions.

For details on the history of the words that describe market trends, read The Quirky And Brutal Origins Of The Terms 'Bear' And 'Bull.'