Stock Market Cycle and Trends

• A complete stock market cycle loosely coincides with an economic cycle lasting several years and is comprised of bull (up) and bear (down) phases. The bull phase usually lasts several years; the bear phase anywhere from several quarters to several years. Bull and bear markets are called primary trends, which in turn are comprised of several intermediate trends, each lasting several months. Both are typically interrupted by several corrections, or moves in the opposite direction of the trend, which can last anywhere from several weeks to several months. Short-term trends are up and down moves that occur during an intermediate phase and can last anywhere from several days to several weeks.
  
  

Rallies

• A rally can occur anywhere during any phase. Obviously it must be long enough for investors to notice and benefit from it. But since it's hard, if not impossible, to predict the market, opinions differ as to whether the market is in a rally. Some observers may call a rally early on; others may want to see a more definitive market advance.
  
  

Attributes

• A rapid advance of stock prices during a string of mostly up days on strong volume is all it takes for observers to start talking about a rally. The longer and steeper the advance, the stronger the rally is said to be. Conversely, weak or poor rallies do not last long, do not show rapid price advances and occur on low volume.
  
  

Rally Is Not a Market Indicator

• Since a rapid price advance can occur anytime, anywhere for any reason during a stock market cycle, by itself a rally is not a market indicator. Some of the strongest but short-lived advances actually take place during bear markets and are called bear market rallies. Most of these rallies fail, and the market resumes its downward trend. Some investors may mistake a rally for the beginning of a stock market uptrend and start buying, only to see their gains turn into losses a few days later.
  
  

Other Contexts

• The world "rally" is often used to describe a strong upward move even if it lasts only a day, as in: "Stocks rallied today on news of lower unemployment claims." One good day in the market certainly does not constitute a market rally.