The following editorial was published in Price Perceptions issue #1063 on December 2, 1995 Bull Markets are Not Created Equal… “A bull market is like a flower. If it is forced to bloom too soon, it will wither and die without reaching its full potential.”             - Roy W. Longstreet Students of the marketplace have long observed that no two bull markets are alike. Some begin without warning, advance quickly, and end as suddenly as they began. Others advance in spurts and fits, constantly testing bullish conviction, then explode to heights never imagined. Why do markets respond to bullish news in different ways? Is there a way to understand and quantify different categories of bull markets? Roy Longstreet, renowned for his insight on commodity markets, discovered that bull markets advance in only one of two ways... …in anticipation of supply tightness …or, in realization of supply tightness Anticipatory bull markets advance before tightness ever occurs. In this type of advance, demand is rationed before the severity of shortage is known. Therefore, anticipatory bull markets never reach their full price potential and normally end before physical tightness occurs. Price advances on weather during the growing season are the most common types of markets in this category. An excellent example of an anticipatory bull market was the “drought rally” in corn and soybeans during the summer of 1988. The entire bull market was over before tightness was ever experienced. Anticipatory markets are characterized by... …widespread media attention …a high level of small trader speculation …futures gaining on cash markets …prices topping before peak of tightness …a high level of comfort and confidence Realizing bull markets advance as tightness occurs. In this type of advance, demand is rationed as the severity of tightness expands. Because the true severity of shortage is not known, the market advances in spurts during the early stages, testing whether or not demand has been curbed to the degree necessary. The latter stages of the advance are normally sharp, fast, and exceed all price expectations. This occurs because the severity of shortage was not realized early and the “urgency to ration” becomes immediate. The 1987-88 copper market was an excellent example of a realizing advance. Realizing markets are characterized by... …little media attention …cash markets gaining on futures …prices peaking at levels much higher than expected …a low level of comfort and confidence as emphasis is placed on potential negative events Bull markets are not created equal. If they are anticipated too early, the entire advance can be taken back. If they are realized too late, shortage can become too severe and government steps in to control price or supply. The general rule is... the later the response, the greater the advance. This year’s advance in grains and soybeans exhibit all the classic characteristics of a realizing bull market. The latter stage of price acceleration has not yet begun. This stage will become the most difficult, but the most profitable, of the entire move. Those who avoid the pitfalls of overtrading and/or loss of confidence will be the successful survivors. Bill Gary President/Editor CIS, Inc. Click Here To Return TRADING IN COMMODITY FUTURES OR OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. Commodity Information Systems, Inc. · 3030 N.W. Expressway #725 · Oklahoma City, OK 73112 Phone: (800)231-0477 or (405)604-8726 · Fax: (405)604-9696 · Email: info@cis-okc.com © 2010 CIS All Rights Reserved