If you want to know what is driving the bullish stock market trend, I have narrowed it down to five things. They have become pretty important indicators in the short term, and they may last for even longer. Naturally, ideal trading conditions are not always present, but suffice it to say that sentiment, momentum, liquidity, FOMO (fear of missing out) and seasonal trends are strong drivers right now.
5 things driving the bullish stock market trend
First on the list: Sentiment
Sentiment is essentially how traders are feeling about the markets. It can change quickly, but it usually takes quite some time to move from bullish to bearish (or vice versa).
Certainly the rising stock market feeds into our confidence, even if a strong trend barely gives you a chance to get on board. Are you sitting there waiting for the right moment to get into a trade? The bullish sentiment may seem like a wall that is in your way. You just need to climb over it.
Momentum and liquidity go hand in hand
Strong momentum in price action pushes the markets beyond its limits. Couple that with heavy money flows and liquidity, and you have the tinder to fuel a raging fire of bullish behavior.
How long will this momentum last? It doesn’t matter. Ride it out until it runs out of steam, like a surfer riding a wave to the shore.
FOMO feeds momentum
FOMO helps generate momentum and liquidity. Eventually investors and traders get frustrated on the sidelines and say, “Enough! I’M IN.”
The lack of a market pullback is going to frustrate most investors waiting to buy a dip. But as I said above, the best trends barely give you a chance to get on board.
Seasonal trends are strong market indicators
Lastly, let’s talk about seasonal trends. It is hard to connect the data between bullish markets and seasonal trends unless you look back decades. You can try to rationalize seasonal patterns, but it’s better to just trust historical moves and play the direction of the trend. It won’t work 100% of the time – nothing ever does – but if probabilities are in your favor, then it is worth taking the risk.
As with any trend, believe what the markets are telling you and place trades accordingly.
