How do we know when the Bull Market starts?

As investors, knowing when the Bull Market starts is critical information as it is a rare opportunity, one that can be exploited to maximise your earnings from the stock market.

So what exactly are the symptoms of the start of a Bull Market?

In short,

  1. Short Term Interest Rates Fall (Cost of borrowing falls, increasing proportion of leveraged investments)
  2. Yield Gap narrows (difference in yield between bonds and equity dividends)
  3. Sudden fall in Market and everyone agrees to sell out
  4. The Coppock Indicator starts to rise (from a Negative index)

The first three symptoms are relatively easy to spot within the news/media. For new investors who may be unfamiliar with the 4th symptom, involving the Coppock Indicator, I shall explain it below.

The Coppock Indicator has proven to be the most historically reliable predictor of the start of a bull market. It measures the underlying investors’ confidence in the market. The indicator is closely based on wave theory, basically the theory that involves regular economic cycles on booms and busts.

While it is reliable, it is useless in predicting stock price movements during sudden surges of enthusiasm and moments of panic.

  • Coppock Indicator >0 –> Bull Market Exists
  • Coppock Indicator = 0 –> Baseline
  • Coppock Indicator <0 –> Bear Market Exists

The start of a bull market is predicted when negative values become less negative. (e.g. -120 -> -110)

That’s it for now! I hope you’ve benefited from this post by learning more about identifying the start of bull markets! =)


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