Bear markets refer to market developments that denote a continuous decline in the price of securities.
The investors expect losses and the pessimistic attitudes thrive. In should be noted that Bear markets differ from corrections which last no longer than two
months. In contrast to corrections, the bear markets do not usually offer
good entry points. Moreover, it is difficult to predict when the bottom will be reached.
The bear market appears when the state of the economy starts to decline. There is a considerable drop in most of
the stock prices. This substantial decline is typically due to
decreases in the profits of corporations. Alternatively, the
bear market starts after corrections of over-evaluation. This happens when the value of stocks had been too high
and now decreases to more acceptable levels. Scared investors will sell their securities and cause a further
drop in the price level. This herd behavior becomes worrisome for other investors who also decide to sell their
stock. The whole process turns into a vicious cycle.
In general, the value of the securities may drop suddenly or over an extended period of time. The final result
will be the same: the quoted value of securities declines. Two
major conclusions may be drawn with regard to bear markets. Firstly, the bear market affects adversely only
those investors who plan to sell their stock at the very moment. Secondly, long-term investors profit from the
overall decline in prices which accompanies the bear market. The average investors should look for large and
solid corporations which are expected to grow during the next twenty years. Even if their stock prices fell
considerably, these companies are more than likely to survive the drop in values. Therefore, it is important to
differentiate between the current value of the stock and the business itself.
Free charting webinarMon, Nov 18th, 2013 12:00 PM - 1:00 PM ESTDuring the 60 minute session Paul Coghlan, founder of Coghlan Capital, looks at current charts for currencies, precious metals, US indices, highlighting turns and low risk entry points using the Median line analysis methodology. Median line analysis reduces risk and increases the chartists ability to see trend direction, trend
strength and highlight entry and exit levels. Seats are limited so be sure to reserve your spot today. The webinar will be recorded, by signing up you'll receive an email with the webinar replay afterwards. |