In this paper we will discuss about several bear market indicators. These helps the investors to anticipate the bear market and plan accordingly. Some of them are very important while some of them are seldom used. Some indicators are available in the US bear market which signify the occurrence of a bull market.
These are described below.
Advance Decline Line:
This indicates the cumulative number of shares advancing over the total number of decreasing shares on the New York Stock Exchange. Advance Decline Line has been used since the beginning of the last century.
Dow Jones Transportation Average:
This is another important bear market indicator. If the average declines, then it will be a sign of a bear market. On the other hand, if the Dow Industrials Average goes high then, the Transportation Average will loose its value. Charles Dow had spotted the divergence in the Industrials Average and Transportation Average.
If the volume remains high for a long time then, the investors assume that there is a bear market. Volume increased significantly in 1997and went a record high in 2000.
In a bear market the prices show a “lower high and lower low” trend. The price of some securities on NASDAQ Stock exchange has decreased recently. These are, Microsoft, Eastman Kodak, AT&T, America on Line, Eli Lilly & Co., General Motors etc.
When the earnings from the stocks get down then it signifies a bear market. When a particular stock of any company goes down, it signifies that the company’s earnings are also get decreased. In that respect it signifies a bear market.
Foreign Stock Markets:
The foreign stock market generally is not considered as an essential bear market indicator. After 1987, when the major stock markets in the world broke down, it is sometimes used as a bear market indicator.