Is the Bull still Alive? May 21, 2020

Is the Bull still Alive?

Have you ever wondered why an up-trending market is called a “Bull” market whereas a down trending market is called a “Bear” market? This is because when a bull strikes, it will first lower its head before swinging its horns upwards, thus when the market has an upward trend, we call it a “bull” market. On the other hand, when a bear strikes, its paws are raised high and swung downwards, so when the market experiences a downward trend, we call it a “bear” market.

History has shown that the stock market is a place where fluctuating trends are observed. Bull market comes after the bear market and vice versa, a natural process that takes place in the stock market.

According to research done by Robert Miner[1], he found that in the past 120 years, the Dow Jones Index experienced bear market 15 times (in technical terms, bear market begins when an index falls at least 20% from the peak). He discovered that every bear market has 3 stages. First, the index tumbles fast by more than 20%, followed by V-shaped recovery or U-shaped recovery (however, it will not reach the previous peak level) before it tumbles again, usually to a much lower level than the initial stage.

Is the Bull still Alive?
Figure 1: Three typical stages of a bear market


The theory as to why the bear market has 3 stages is summarised as follows:

In the first stage, new black swan events trigger massive selloff out of fear. However, there are hopeful investors who continue holding onto their shares. As a result, the stock market tumbles to a certain point and enters stage 2.

In stage 2, market participants find the stock market undervalued and subsequently the demand for stocks increases, leading to a V-shaped or U-shaped rally, which then bringing about opportunity for investors who previously trapped in Stage 1 to sell off their shares. The stock market tumbles again as a result and triggers the next stage. When that happens, the rally in stage 2 becomes a “dead cat bounce”.

In stage 3, the selling wave continues like an avalanche, reducing confidence and diminishing hopes held by investors.

Of course, historical trends serve only as a good reference for our learning and gives a gauge on future market performance.

So, what stage are we at now after the recent stock market crash? To answer this question, allow us to first examine the Dow Jones Industrial Average (DJIA) and Straits Times Index (STI) index charts below.


Review from Recent Market Crash

1) US Stock Market

Is the Bull still Alive?
Figure 2: DJIA Index 6-month chart [2]


The Dow Jones Industrial Average (DJIA) index fell by 37% in just 6 weeks from 12 Feb 2020 to 23 Mar 2020 due to the worsening COVID-19 outbreak worldwide coupled along with the biggest drop in oil price in decades following Saudi Arabia’s oil price war with Russia. The US Fed announced unlimited quantitative easing (QE) on 23 Mar 2020. Following which, the index recovered 28% from its low by 7 May 2020.

2) Singapore Stock Market

Is the Bull still Alive?
Figure 3: STI Index 6-month chart [3]

The Straits Times Index (STI) displayed similar trend patterns as DJIA index. The STI was down 31% in just 6 weeks before a slow recovery that reached 16% by 08 May 2020.

3) Observation and analysis

From both charts above, we saw that both indices are slowly recovering from the dip since 23 Mar 2020, the day where the US Fed announced unlimited QE. Quantitative Easing (QE) is the act of the US Fed buying bonds in order to inject US dollar funds to boost the US economy. In the past, the Fed committed a specific amount of US dollar funds to purchase Treasury bonds and mortgage-backed securities, and nothing more. But this time because of the unlimited QE program, the Fed committed to supply money to the US economy through open-ended ongoing purchase of bonds until a point where the Fed is satisfied that the economy is well recovered.

The recent market crash is different from what we had learned from the past bear markets.

Based on the current trend that we are seeing, we can expect similar relief packages to be announced in the next few months if the economy continues to be dampened by the COVID-19 outbreak.

Since unlimited QE was announced, both DJIA and STI indices were unaffected by this negative piece of news and saw recovery despite the release of IMF’s a report predicting a -6% contraction in global GDP (the worst recession since the Great Depression and worse than the Financial Crisis) [4], plunge in US oil prices to below zero for first time in history [5] and the rise in US’ COVID-19 cases to a million (as of 28 Apr 2020). [6]

Is the Bull still Alive?
Figure 4: Institute for Supply Management Purchasing Managers’ Index (ISM PMI) bar chart [7]

In addition, the recent ISM PMI chart shows that May 2020 PMI was in sharp decline. The PMI was derived from a monthly survey sent to supply chain managers in the US based on five major survey areas: new orders, inventory levels, production, supplier deliveries, and employment. The strong PMI downtrend suggests that the US economy will be severely affected in the coming months Yet, both DJIA and STI indices did not tumble in tandem with the PMI. This could be due to on-going strong fiscal support from both the US congress and the Fed to the US economy and the stock market.

Hence, in the short term, the stock market will most likely be poised towards its path of recovery. However, should there be another Black Swan event (outside of both COVID-19 and oil prices), there is a chance the stock market would crash again and trigger the Stage 3 bear market as the stock market fears uncertainty.


What’s Next For You?

Despite the chaos in the economy we are in right now, both DJIA and STI indices are slowly recovering since the recent dip on 23 Mar 2020. In view of this, you may want to slowly add more long positions in stocks. However, if you have a higher risk appetite and would want to gain market upward movement exposure with small and limited capital, you may want to take a leveraged long position with Contracts for Differences (CFDs) to gain access to underlying stock price or index point movements.

Please see examples below on how CFDs can amplify your returns with small capital commitment when both underlying stock price or index point goes up.

Examples 1 – Equities CFD on Shares

Share Trading CFD Trading
On 04 May 2020, you initiated an open position.
Share price = $1.00

Share quantity = 10,000

Total Share contract value = $1.00  x 10,000 = $10,000


Total capital commitment = $10,000

Share Price = $1.00

CFD contract quantity = 10,000

Total CFD contract value =  $1.00  x 10,000 = $10,000


If CFD on Stock A has 10% margin requirement, the required margin = $10,000 x 10% = $1,000


Total capital commitment = $1,000


On 05 May 2020, the share price increased by 2%.
Share Trading CFD Trading
Latest share price = S1.02


*Gross Profit = ($1.02 – $1.00) x 10,000 = $200


*Return of Investment (ROI) = $200 / $10,000 = 2%

Latest share price = S1.02


^Gross Profit = ($1.02 – $1.00) x 10,000 = $200


^Return of Investment (ROI) = $200 / $1,000 = 20%

This means for a 2% increase in share price, your share trading ROI is 2% but your CFD ROI becomes 20% (10x leverage).


Examples 2 – Straits Times Index SGD 5 CFD

On 04 May 2020, STI index was at 2500.
In Straits Times Index SGD 5 CFD contract, each STI point is worth SGD 5.

Initial capital commitment for holding one Straits Times Index SGD 5 CFD contract
= 2500 x SGD5 x 6% x 1 = SGD750

On 05 May 2020, STI index rose 2% to 2550.

^Gross Profit = (2550 – 2500) x SGD5 x 1 = SGD250

^Return of Investment (ROI) = $250 / $750 = 33.3%

This means for every 2% gain in index point, you earn 33.3% of your original investment capital (16.7x leverage).

Although CFDs can magnify your gains through leverage, losses are also magnified and you could lose more than the original investment committed when the market or index point goes against you. The key is always to use leverage responsibly and cut losses quickly when the market turns against you.

* Calculation here omits commission, clearing fees and all other trading fees in shares trading. Actual ROI will be lower than the ROI mentioned in the examples above.
^ Calculation here omits commission and finance charge for CFD trading. Actual ROI will be lower than the ROI mentioned in the examples above.



Both COVID-19 pandemic and the recent oil price crash triggered market crash. Thankfully, the stock market is seeing gradual recovery given the announcement of unlimited QE on 23 March 2020. Besides, we can expect more and more relief packages to be announced in the next few months if the economy continues to be dampened by the COVID-19 outbreak. Hence, this could be the time for us to seize the opportunity to trade the market with a “long” view.

Thank you for sticking with us throughout this article! We sincerely hope that you have found value in our analysis. Be sure to check out our other articles and the courses that we offer. If you have any questions on trading or investing, feel free to drop us an email at and we will be glad to assist you through your investment journey.

Till next time folks!

Begin your CFD Trading Journey with us!


About the author

Tan Kean Soon

Kean Soon graduated from National University of Singapore with Bachelor's Degree in Materials Engineering. He is a passionate CFD dealer who believes that equity markets can help grow one's wealth with the right mindset, risk management & discipline.

In his free time, he enjoys learning and experimenting with long-term investment and short-term trading ideas as well as following the latest market news to get in touch with market reality.

No Related Market Journal.

Contact us to Open an Account

Need Assistance? Share your Details and we’ll get back to you


This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <> for more information in relation to the dividend distributions.  

The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

This advertisement has not been reviewed by the Monetary Authority of Singapore.  


Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
Tel: (65) 6230 8133 Fax: (65) 65383066