Trust the Bears in the Stock Market

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It's no secret that bears rule Wall Street these days.

The term bear market refers to a prolonged period of selling pressure, where the overall market drops by some value over a specified period of time. Bear markets are categorized by an abundance of short sellers, with intermittent upswings called bear market rallies.

Investing terminology using the bear reference is diverse. A bear raid is when investors illegally attempt to force stock prices lower by taking big short positions while spreading bad rumors about a company. A bear trap is a coined phrase referring to a situation where short sellers mistakenly anticipate falling prices following a bear market reversal, and are forced to cover their positions at a higher price.

Since hitting an all-time high in October 2007, the stock market has experienced one of the worst bear markets in recent history with the S&P 500 down nearly 50%. By comparison, from September 2000 to March 2003, the S&P dipped 45%. The 1987 October/November crash saw a decline of 27%.