Bull – A bull is an animal which when infuriated charges with rage and brute force at other animal making it almost impossible to be stopped on it course. In Share market, it is a symbol of investor optimism and confidence. Bear – A bear, on the other hand, is more placid and laid back animal with no known qualities of aggression. In the share market, Bear is a symbol of pessimism and lack of confidence.
Bulls are Share market operators who believe that the stock prices would go up and therefore take positions accordingly that is take long (buy) positions. This helps the prices to push further up. Thus bulls are symbolic of overall optimistic trend in the market. This helps in creating a positive environment where stock prices rise. Bears, on the other hand, are operators who anticipate that the stock prices would go down and accordingly take short (sell positions).Bears therefore pull the prices down.
Now coming back to the question of why does the share price fluctuate so much? This is because price at any moment price is the interaction and bulls and bears in the market. If the bulls win the price rises, if the bears wins the prices fall. Understanding it at a micro level, at any price of stock, there are group of operators who sell the shares because they feel that prices might go down and there are other set of operators who feel prices would go up and buy at that price. Thus at any price there is always forces pulling down or pushing up. Thus the dominance of bulls or bears over a certain period of time is called bull phase or bear phase respectively.
The bull phase or bear phase can be categorized as short term, medium term and long term. There are lot of factors that influence the bulls and bears. These factors can be micro that is company specific pertaining to the performance of company/companies. The other factors are macro-relating to the economy in general, the growth rate, Inflation Rate, the GDP rate, etc. These factors have a bearing on the investor sentiments in as much as analyzing the growth potential of the companies, the overall trend of the economy, and the liquidity at the stock market. These are the factors that determine the investor confidence and hence the prices.
The greatest bear phases have been during the time of depressions when the investor confidence had completely disappeared. The bulls foresee robust economic growth, good and consistent industrial performances. These factors only come to play in the long term. The short tem factors are governed more by the immediate response to certain immediate triggers. For example a certain rise in the quarterly numbers of companies/companies may propel bulls to dominate pushing the prices up. Similarly, the fear of slowdown in the economy might just cause stock prices to go down in the in the short term.
The bulls and bears basically represent the sentiments prevailing in the market.