How to Know When a Bull Market Is Happening (7 Signals)

Let me start with a confession: I've called a bull market at least three times before it actually happened. The first time was 1999, and I was right — but for the wrong reasons. The second time was 2007, and I was embarrassingly early. The third time, I waited too long and missed the first 15% of the run. So I know firsthand that spotting a genuine bull market is tricky. But after decades of trading, I've learned to ignore the noise and focus on a handful of concrete signals that rarely lie.

What Is a Bull Market?

Let's get one thing straight: a bull market isn't just a 20% bounce off a low. I've seen plenty of those die within weeks. A genuine bull market is a structural shift in how investors value risk. It's when the market stops pricing in disaster and starts pricing in growth again.

In technical terms, most experts define a bull market as a sustained rise of at least 20% from a recent trough, measured by a major index like the S&P 500. But the number alone is lagging. By the time the index prints that 20%, you've already missed the first wave.

That's why you need to watch the underlying signals — the ones that show up before the headlines.

How to Use Moving Averages to Spot a Bull Market Early

I usually start with the 50-day and 200-day moving averages. When the 50-day crosses above the 200-day, that's the famous 'golden cross.' But I don't trade on it alone. Why? Because the cross happens after a significant rally — it's a confirmation, not an early warning.

Here's what I actually look for: the 200-day average flattening out after a long decline. That's the first sign that sellers are exhausted. Then I want to see the index hold above it for at least a couple of weeks, with dips getting bought quickly.

A real bull market tends to respect the 50-day average as support. During bear market rallies, the index usually breaks below it within days.

How to Confirm a Bull Market with Breadth and Volume

Breadth: The Percentage of Stocks Above Their 50-Day Average

Price can lie, but breadth rarely does. I track the percentage of stocks above their own 50-day averages. In a healthy bull, you want at least 60-70% of stocks above that level. If the index is making new highs but only 40% of stocks are participating, that's a red flag.

Volume: The Fuel Behind the Rally

Volume matters too. Bull market advances should come with rising volume, and pullbacks on lighter volume. I compare current volume to the 20-day average. If breakout days are 1.5 times the average volume, that's a strong sign.

I also watch new highs vs. new lows. On the NYSE, I want to see new highs consistently outnumbering new lows by a wide margin. When that ratio flips, it's time to worry.

Sentiment Indicators: Are They Really Telling You the Truth?

The AAII Investor Sentiment Survey is a classic. When bullish sentiment jumps above 40% and stays there, animal spirits are returning. But beware: extremes work the other way. When everyone is bullish, the top is near.

I've learned to watch the CNN Fear and Greed Index too. It uses multiple inputs like market momentum, safe-haven demand, and option activity. A reading above 70 signals greed, but during early bull phases, it can stay high for months. The trick is to use it as a background check, not a trigger.

My non-consensus take: ignore the 'dumb money' survey and watch the put/call ratio. When institutional put open interest falls relative to calls, smart money is positioning for upside. That shift often happens weeks before the index confirms.

Why the Economy Doesn't Always Confirm the Bull

Investors often wait for GDP or jobs data to improve before calling a bull. That's a mistake. The stock market is a leading indicator — it turns six to nine months before the economy does.

For example, in the recovery from the pandemic, the S&P 500 bottomed in March, while unemployment was still spiking. By the time GDP turned positive, the bull was already nine months old.

I still check the yield curve, though. An inverted curve (short-term yields above long-term) is the best recession warning we have. When it uninverts — meaning long-term yields rise back above short-term — that's often the green light for equities. That pattern has repeated in recent market cycles.

Common Mistakes When Identifying a Bull Market

Let me save you from the lessons I learned the hard way.

• Buying the first 5% rally off a low. That's often just short covering. I wait for the second or third higher low to form.
• Ignoring the Fed. If the central bank is still hiking rates aggressively, a bear market rally is more likely. The first pause in hikes is a positive, but the first cut is even better.
• Confusing individual stock strength with market strength. A few tech names can make the index look great while 80% of stocks are falling. Check the equal-weight index.

I've seen traders blow up by calling a bottom after one monster day. Patience is your edge.

Step-by-Step Checklist to Detect a Bull Market

Here's a simple checklist. If you get at least 6 out of 8, you're likely in a new bull.

I print this list for my clients every month. If you're missing two or more, don't call it a bull yet.

FAQ: Your Bull Market Questions Answered