Investing in the Stock Market can be very exciting, but at the same time it can be terrifying to make the wrong bet on a stock or the wrong bet in your underlying investment strategy. All it takes is one or two mis-steps to wipe out your entire investment portfolio. Overnight you can watch years and years of careful savings and investment evaporate like it never existed!

One huge trap that many investors fall into, both amateur investors as well as professional investors on Wall Street, is to fall for a Bear Market Rally. They are incredibly easy to get sucked into and are probably some function of hope and human nature that can be devastating if you don’t watch out!

First of all, what exactly is a Bear Market Rally? Well, generally speaking, a Bear rally is a rally that occurs during a bear market. Stocks fall across the board for a long period of time during a bear market. After days, weeks, even months of watching stocks fall, suddenly you notice that they are starting to rise again!

You wait a few days, maybe even a week or two, and see that the rally has continued! Maybe the Bear is truly over! That’s when you fall into the trap and start investing again! Inevitably the same thing happens in every Bear market…they turn back downwards. No, the bear was NOT over…it was just taking a little breather on its way back down.

What causes a bear market rally? Usually it has to do with short sellers, who have been selling short for some time and making a killing. Eventually the short sellers need to cover their positions and buy back in. If enough short-sellers buy back in any one time, this excess demand can make the stock prices increase. A short increase in prices can fuel speculation from people like you who think the bear may be over and buyback in.

Of course eventually all the short-sellers will have covered their positions and demand will decrease back to its present downward level and the bear will continue, often wiping out the increases that you just saw.

Bear market rallies generally tend to last about five or six weeks and not much longer than that. In fact, once a bear rally ends, it usually ends abruptly and the stock prices across the board usually drop dramatically right away.

I know that it is incredibly hard to watch the stock market increase day after day and week after week after an extended bear has shown nothing but plunging prices for months on end. It’s just human nature to hope for the best, and hope that the bear is actually over.

That’s the trap that most investors fall into. You have got to be able to look past that emotional side of it and instead focused solely on market fundamentals. If the fundamentals of the market have not improved, then the bear is not going to be over even if prices are increasing across the board.

So keep an eye on fundamentals, and as always in the stock market, try to keep your emotions out of it and you should be just fine in the long run.

Jason Markum has been writing articles online for over thirteen years. When not writing about investments, Jason runs a leaded glass window web site where he reviews leaded glass doors for your home and household.

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Sometimes I wonder if stock market investing is more science or art. Do you ever wonder that? It seems like the people who know in advance what the market is going to do (and take appropriate action to make money off of that) seem to work as if they have a crystal ball in front of them. I’m not sure if it’s voodoo or insider trading or what, but some people just seem to know… do you know what I mean?

For instance, how come some people just know when the stock market is about to crash? How do these people get their money out in time so that they don’t lose all the value that they have built up? Well the answer may be easier than you think. It’s not a crystal ball, and it’s not voodoo… and it’s certainly not insider trading!

In this article today I’m going to give you a few indicators that you can use to determine whether the stock market is about to take a turn for the worse. These indicators aren’t the gospel truth, but they will give you a heads up and an idea that the market is about to take a turn for the worse.

The first thing to look out for is heavy New York Stock Exchange member short selling. Members are professional investors who spend their time day in and day out on the floor of the exchange investing for themselves and for their clients. These guys and girls have a fairly strong record of being able to determine when the market is about to turn… I won’t go so far as to say that they cause the market to turn, but they’re certainly the first ones to see it happening and when they do see it happen the first thing they do is sell short.

Selling short is when they borrow shares and sell them in the hope that those same shares will decline in value at which point they can buy them back at cheaper costs and return them to those whom they borrowed them from… pocketing the difference in price as profit.

When member short sales exceed 87% of all short sales within a given week, then you have a pretty good idea that the market is about to turn for the worse. You can find this information in Barrons and in the Wall Street Journal and through many private financial newsletters.

The next indicator is to watch the for Federal Reserve Bank for an interest rate increase. Stocks are very sensitive when it comes to the Federal Reserve and especially when it comes to interest rates. Low interest rates means a lot of stock market activity and precludes bull market advances usually. On the other hand, rising interest rates usually restricts stock market investing and causes the market to take a downturn.

Finally watch for heavy stock churning. When people buy and sell lots of stock, it’s an indicator that the market is becoming unstable and therefore likely to take a downturn. You can watch volume levels fairly easily online.

So there you have several indicators that you can use to determine when it may be time to sell your stocks before they start falling.

Jason Markum has been writing articles online for over thirteen years. When not writing about investing, Jason runs a wildly popular electric shavers for men web site where he reviews braun electric shavers for your shaving needs.

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