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September 1, 2010 / Suzie

Understanding the Market: Two Words You Should Know

This morning, the market jumped 2% in reaction to President Obama’s call to the end of the War in Iraq. He is refocusing his efforts on the economy, which means that it is likely time for us to start translating market vernacular into layman’s terms and using it to our advantage.

The Wall Street Journal announced that the stock market “kicked off September on a bullish note.” I’m sure that you’ve heard the terms “bull” and “bear,” but what do they mean? Well because we know that the market went up 2%, that must mean that bull (or in this case “bullish”) means an upward trend. A bull market means that investors are showing faith in the current market. Prices go up, share trades increase, and things are looking up. For a true bull market, the rise of value in the market must go up by at least 20%. I remember it this way: bull markets charge ahead.

We like bull. We want a lot of bull. We want to try to avoid the bull’s opposite, the bear. A bear market  is a market where investors have little faith in the current market. Prices and share trades decrease. For a true bear market, the fall of value in the market must go down by at least 20%. I remember it this way: bear markets are bad news bears!

Next time: Stocks, Bonds, and Mutual Funds, Oh My!



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One Comment

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  1. bonjour / Jan 14 2011 9:04 am

    great article. I didn’t know that for a bull market to be confirmed, it must go up by 20%.
    Interesting.

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