what is a rally 
a rally is a period of sustained increases in the prices of stocks bonds or related indexes a rally usually involves rapid or substantial upside moves over a relatively short period of time this type of price movement can happen during either a bull or a bear market when it is known as either a bull market rally or a bear market rally respectively however a rally will typically follow a period of flat or declining prices a rally may be contrasted with a correction or market crash which is a rapid or substantial downward move in short term prices understanding a rallythe term rally is used loosely when referring to upward swings in markets the duration of a rally is what varies from one extreme to another and is relative depending on the time frame used when analyzing markets a rally to a day trader may be the first 30 minutes of the trading day in which price swings continue to reach new highs whereas a portfolio manager for a large retirement fund looking at a much larger picture may perceive the last calendar quarter as a rally even if the previous year was a bear market a rally is caused by a significant increase in demand resulting from a large influx of investment capital into the market this leads to the bidding up of prices the length or magnitude of a rally depends on the depth of buyers along with the amount of selling pressure they face for example if there is a large pool of buyers but few investors willing to sell there is likely to be a large rally if however the same large pool of buyers is matched by a similar amount of sellers the rally is likely to be short and the price movement minimal a rally can be confirmed by various technical indicators oscillators immediately begin to assume overbought conditions trend indicators start shifting to uptrend indications price action begins to display higher highs with strong volume and higher lows with weak volume price resistance levels are approached and broken through underlying causes of ralliesthe causes of rallies vary short term rallies can result from news stories or events that create a short term imbalance in supply and demand sizeable buying activity in a particular stock or sector by a large fund or an introduction of a new product by a popular brand can have a similar effect that results in a short term rally for example almost every time apple inc has launched a new iphone its stock has enjoyed a rally over the following months longer term rallies are typically the outcome of events with a longer term impact such as changes in government tax or fiscal policy business regulation or interest rates economic data announcements that signal positive changes in business and economic cycles also have a longer lasting impact that may cause shifts in investment capital from one sector to another for example a significant lowering of interest rates may cause investors to shift from fixed income instruments to equities this could create the conditions for a rally in the equities markets bear market ralliesmarket prices can rise even during a longer term down trend a sucker rally for instance describes a price increase which quickly reverses course to the downside sucker rallies often occur during a bear market where rallies are short lived sucker rallies occur in all markets and can also be unsupported based on hype not substance rallies which are quickly reversed sucker rallies are easy to identify in hindsight yet in the moment they are harder to see as prices fall more and more investors assume that the next rally will mean the end of the downtrend eventually the downtrend will end in most cases but identifying which rally turns into an uptrend and not a sucker rally is not always easy 