Primary Trend

Trend identification techniques used in technical analysis and forms a basic building block for many of the other technical analysis topics.

A trend is a time measurement of the direction in price levels covering different time spans. There are many trends, but the three that are most widely followed are primary trend, intermediate trend, and short term trend.

The primary trend generally lasts between 9 months and 2 years and is a reflection of investors' attitudes toward unfolding fundamentals in the business cycle. The business cycle extends statistically from trough to trough for approximately 3.6 years, so it follows that rising and falling primary trends (bull and bear markets) last for 1 to 2 years. Since building up takes longer than tear down, bull markets generally last longer than bear markets.

The primary trend cycle is operative for bonds, equities, and commodities. Primary trends also apply to currencies, but since currencies reflect investors' attitudes toward the interrelationship of two different economies, an analysis of currency relationships does not fit neatly into the business cycle.

In an idealized situation, the primary uptrend (bull market) is the same size as the primary downtrend (bear market), but in reality, of course, their magnitudes are different. Because it is very important to position both (short-term) trades and (long-term) investments in the direction of the main trend, what important is identifying reversals in the pri­mary trend.