How to Know When a Bull Market Starts: 7 Signs I Use

I remember sitting in front of three monitors back in March 2009, watching the S&P 500 bounce off lows I never thought I'd see again. Friends told me to sell everything. But something felt different – the way the market held support, the quiet accumulation happening under the surface. That was the birth of a new bull market, and I almost missed it because I was waiting for a single “official” signal.

Over the years I've learned that no single indicator tells you a bull market has started. You need a constellation of signs, and you need to see them together. Here are the seven signals I personally track to spot a bull market early – before the mainstream news catches on.

Sign #1: Breakout with Volume

The most basic yet powerful signal. A major index like the S&P 500 or NASDAQ breaks above its 200-day moving average and does it on rising volume. The daily volume should be at least 20% above the 50-day average. I look for at least two consecutive days of this. In 2009, the S&P broke the 200-day in April with volume almost 40% above average. That wasn't a bear market rally – that was a regime change.

Sign #2: New Highs Breadth

I track the number of stocks on the NYSE hitting 52-week highs versus 52-week lows. A bull market starts when the number of new highs consistently exceeds new lows by a ratio of at least 2:1. You can find this data on the NYSE's website or through free sites like MarketWatch. When I saw that ratio flip in early 2020 (after the COVID crash), I knew the recovery was real, even though headlines were screaming doom.

One nuance most guides miss: check the percentage of stocks above their 200-day moving average. If that number jumps from 10% to 60% within a few weeks, that's a powerful confirmation. I use stockcharts.com's breadth indicators for this.

Sign #3: VIX Capitulation

The VIX (volatility index) is the “fear gauge.” During a bear market, the VIX stays elevated. But the birth of a bull market is marked by a sharp decline in VIX from extreme highs (above 40) back below 20, often accompanied by a VIX futures curve shifting from contango to backwardation. I've seen it happen three times in my career – the drop is usually faster than anyone expects. In late 2022, VIX dropped from 36 to 14 in just three months. That was the early whisper of the 2023 rally.

But here's the non-consensus part: don't wait for VIX to hit 12 or below. By then most of the gains are already in. A bull market usually starts when VIX is around 18-20 after a high spike. Anything below 15 is late cycle.

Sign #4: Leading Indicators Turn

Economic leading indicators (like the Conference Board's Leading Economic Index, manufacturing PMIs, building permits) are lagging in real-time but they offer crucial context. When 3 out of 5 leading indicators stop declining and start rising month-over-month, the recession narrative is weakening. I cross-check with the Copper/Gold ratio – copper is “Dr. Copper” for a reason. A rising copper/gold ratio signals industrial demand picking up.

In my experience, the market usually bottoms before the economic data improves. So if you wait for the LEI to officially turn positive, you've already missed 10-15% of the rally. Use leading indicators as a sanity check, not a trigger.

Sign #5: Central Bank Pivot

This one is huge. The Federal Reserve (or other central banks) stops raising rates and starts cutting, or at least signals a pause. A pivot from tightening to easing is the gasoline for a new bull market. But there's a catch: the first rate cut often comes when the market is still falling. The real signal is when the central bank changes its language – moving from “we need to raise more” to “we are data-dependent.” That subtle shift in the FOMC statement can unleash a wave of buying.

I remember in 2019, the Fed paused after raising rates in December 2018. By January 2019, the market was already up 10%. The pivot wasn't a cut – it was the removal of forward guidance.

Sign #6: Sentiment Extreme – From Fear to… Something Else

Sentiment is weird because it works as a contrarian indicator at extremes. The AAII Sentiment Survey (free weekly) shows the percentage of bulls vs. bears. A bull market usually begins when bearish sentiment is above 50% and bullish sentiment is below 20%. But then you need to see a catalyst. The real signal isn't the extreme fear itself – it's the first week when bullish sentiment jumps 5-10 points while bears drop. That shows the smart money is stepping in.

I also watch the put/call ratio. A ratio above 1.2 for several days indicates extreme fear. When it drops below 0.8, fear is fading. A bull market is confirmed when the put/call ratio stabilizes around 0.6-0.7 after a high spike.

Sign #7: Sector Rotation Confirms

The market always rotates. In a bear market, defensive sectors (utilities, consumer staples, healthcare) hold up better. A bull market starts when cyclical sectors (technology, consumer discretionary, materials, industrials) start outperforming. I compare the relative strength of XLY (Consumer Discretionary) vs. XLP (Consumer Staples). When XLY/XLP breaks above its 50-day moving average, it's a strong signal.

Another rotation I watch: financials. Banks (KRE) need to lead because they benefit from a steepening yield curve. If financials are weak, the bull market might be fragile. I also check small caps (IWM) vs. large caps (SPY). Small caps often lead in the early stage because they are more sensitive to economic recovery.

This guide is based on my personal experience since 2009. I've seen three bull markets start, and each time the same patterns emerged. No single signal is perfect – but together they form a map.