The bull market and the bull run

WHAT’S the difference between a bull market and a bull run? I don’t blame you if you find yourself struggling with these terminologies. With what has been happening in the market, this feeling of perplexity is understandable. I, myself, has been searching for the fine lines to define the difference and understand what exactly is happening.

It has been on a continuous uptrend since the start of the year. It is also climbing faster than before. It is now trading beyond previous levels, which means the market has been trading at higher price multiples, yet it continues to go higher. Contrary to expectations, the market has not shown signs of serious price corrections. Visible price corrections happen only within the trading day. Losses were also minimal.

The market’s close the week before last could have been an indicator of a pending correction. That week, the market’s advance was less than half of its performance in the previous two weeks. It posted a weekly gain of only 62.97 points or 0.97 percent, far below the gains in the previous two weeks of 150.97 points or 2.45 percent and 140.06 points or 2.22 percent. But last week, instead of slowing down to enter into a correction phase, the market did the opposite. It picked up momentum, eliminated the slack and ended higher with a weekly gain of 143.42 points or 2.2 percent.

What could be of significance were the trading results last Friday. The market posted a loss of 2.35 points or 0.04 percent from the previous day. It’s too small to be considered significant. But the deviation happened as the market went through a series of declining gains within the week, indicating two things happened. There was obviously a change of hands and transactions centered on big-cap stocks. As to whether this will lead to another sell-off that would, in turn, drive down prices, will depend on the kind of the buyers. It will not go down if they are taken in by the so-called “strong hands” or long-term buyers. Prices will go down if they are taken by the so-called “weak hands” otherwise known as short-term buyers or speculators.

Splitting hairs

Things look confusing. The market has been outpacing its previously established rates of advances at the same time breaking trading patterns. These developments leave people struggling with the question of whether what has been happening is a lesson that tells us there is a difference between a bull run and bull market.

According to references, there is no distinction between the two. A bull market necessarily brings along the state of a bull run or price run-up. A source describes these two terms as follows: “a bull market (or bull run) is one characterized by a significant and long-term growth in value in the stock market as shown by rising market indicators. In less technical terms, there are (simply) more buyers than sellers.” The concept of a bull run or bull market in the context of the business cycle represents the long-term patterns of expansion and contraction in the economy as witnessed by the flow from recession to recovery and back.”

As we understand it, a bull market is characterized by a sustained rise of share prices. As another reference explains it, “this occurs when investors believe the positive trend will continue for the long term.” Needless to say, the opposite of it is a bear market. But that is not the point at the moment. The question is, if there is a difference between a bull run and a bull market.

As I understand it, a bull run is a series of price movements. It is prolonged and characterized by daily gains.

A reference adds that if the daily price increases are sustained for at least five trading days, “the stock, sector or index could be said to be in a run.” And if the run is the result of rising prices, “it is called a rally, a bull rally. If prices are dropping, the run would be referred to as a bear market rally.”

Bottom line spin

A run of prices is the result of a large amount of money entering the market and bidding up stock prices like what is happening at the moment. Contributory to a bull run or bull market are fundamental factors, technical factors and market sentiments. As experienced, though, a bull market happens when the economy is strong, when more people have money and they are willing to spend it. When this happens, demand becomes stronger than supply; market prices go up. When sustained, we have a bull market.

This is what is happening at present. Buying sentiments are very strong. Because of this, sellers hold on to their shares for higher bids creating, in the process, a scarcity of supply, forcing buyers to buy higher.

In conclusion, the run of stock prices within this period is what is called a bull run. The time frame, at which such price run happens, is called the bull market.

This is not, however, the issue at present. The issue is if the market will continue with its bull run. To my mind, due to unfolding economic developments, the bull market has still a long way to go. The bull run of prices, however, may be determined by the distribution of money into the local economy and the stock market by both local and foreign investors.

(The writer is a licensed stockbroker of Eagle Equities Inc..  You may reach the Market Rider at [email protected] , [email protected] or at www.kapitaltek.com)