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Bears are market participants who expect the market to decline. Bears may expect the broad market averages to decline, or their bearishness may be confined to a specific stock or industry sector. To profit from their forecasts, bears sometimes sell short their markets. Alternately, they may purchase options positions or other derivatives that will gain in value if prices decline as expected. Since high levels of pessimism have often been associated with major market bottoms, a relatively large number bears tends to be viewed as bullish.
A great deal of market lore surrounds bears, and many legendary traders are remembered for their bearish activities. Jesse Livermore was known as the Bear of Wall Street and accused of causing the crash of 1929. George Soros solidified his legendary status by announcing he was bearish on the British pound and shorting the currency until the Bank of England could no longer support it. |
