PREDICTING BULL AND BEAR MARKETS
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Investors turn to theories and complex calculations to figure out
in advance when the market will scream upward or tumble downward. They are
seeking the perfect market indicator into which they can put their numbers and
await a neatly packed reply. In reality, however, no perfect indicator has been
In their attempts to predict the market, economists use technical
Technical analysis is the use of market
data to analyze individual stocks and the market as a whole.
It is based on the ideas that supply and
demand determine stock prices and that prices, in turn, also reflect the moods
One tool commonly used in technical analysis is
the advance-decline line, which measures the difference between the
number of stocks advancing in price and the number declining in price.
Each day a net advance is determined by
subtracting total declines from total advances. This total, when taken over
time, makes up the advance-decline line, which analysts use to forecast market
Generally, the A/D line moves up or down with the Dow. However,
economists have noted that when the line declines while the Dow is moving
upward, it indicates that the market is probably going to change direction and
decline as well.
Now we will cover how investors attempt to make money
during bull markets.