Why bother with stages
A bull market doesn't rise evenly. The pace, the participants, and the stocks doing the leading all change substantially from one phase to the next.
The framework goes back to Dow Theory, which splits a bull market into three phases: accumulation, public participation, and excess. In Taiwan these are usually called the early, main and final stages.
The value of the framework isn't prediction. It's checking whether what you're currently doing fits the stage the market is in.
"Buy the strongest stocks" is a tailwind in the main stage and a falling knife in the final stage. "Buy the laggards for catch-up" usually ends in regret during the main stage, yet it's the defining move of the final one. The methods aren't right or wrong — using them at the wrong time is.
Early stage: nobody believes it
The mood
The previous bear market has just ended and the fear is fresh. The news is bad, earnings are ugly, and people around you are saying it has further to fall.
The defining characteristic: price is rising, but most people think it's just a bounce. Anyone who believed the last bounce got burned, so this time they don't.
What leads
Mostly large caps and financials. The reason is practical — the money entering here is institutional, it needs size, and it can only buy names with real liquidity. When visibility is still poor, buying leaders carries less risk than buying small caps.
The typical Taiwan pattern: TSMC, financials, and a handful of unfairly punished quality names move first, while small caps do nothing. It feels like "the index is up but my stocks aren't."
The technicals
Moving averages shift from bearish alignment into convergence, then slowly turn bullish. The index reclaiming the 60-day and then the 120-day line is a common confirmation. Volume expands gently rather than exploding.
Participation is usually still cautious. The index may be lifted by a few large caps while participation among the top 300 and long-term moving-average breadth remain weak. That is not automatically bearish; it means the new trend is still being tested.
How to participate
Honestly, it's hard. Every signal looks fake at the time, and you're carrying the scar tissue of the last failed bounce.
The pragmatic approach is not to guess the bottom. Wait for 20-session returns, participation and long-term breadth on the homepage to improve, then begin with smaller positions. You miss the earliest part in exchange for risk that is easier to define.
Main stage: the longest and most profitable
The mood
Doubt turns into acceptance. Earnings improve, analysts start raising targets, and the coverage shifts from "weak economy" to "signs of recovery."
This is usually the longest leg, with the largest gains and the easiest money — the trend is clear, pullbacks find support, and stock selection is forgiving.
What leads
Growth stocks with actual earnings, and the leaders of whatever theme is dominant.
The defining feature is that fundamentals have caught up. Revenue growth turns positive and keeps widening, EPS grows, and the price rise has something underneath it rather than pure imagination.
Taiwan's main stage typically has one very clear leading industry, in recent cycles usually some corner of electronics. You'll notice the same industry appearing in your screens over and over, with the leader up the most and second-tier names following at a smaller magnitude.
The technicals
Clean bullish alignment, with buyers stepping in on pullbacks to the 20- or 60-day line. Volume expands steadily without going parabolic. Participation broadens and a growing share of stocks reclaim long-term averages, so the advance is no longer carried by a few index heavyweights.
How to participate
This is the stage this tool suits best.
Run the screener with strict bullish alignment, then use sector strength to find groups where returns and participation lead together. Cross-check those groups with RS, new highs and fundamentals, then use pullback entries to study location.
The sector-screening article covers the method in more detail.
The key skill in the main stage is not getting off too early. This leg will hand you many opportunities to think "it's run far enough, time to take profits" — but the real gains come from holding.
Final stage: fastest, and most dangerous
The mood
Optimism becomes euphoria. The market is all over the media, friends who don't invest start asking what you're buying, brokerage account openings hit records, and social feeds fill with profit screenshots.
"This time is different" shows up in a dozen different phrasings.
What leads
Small caps, low-priced names, turnaround stories, asset plays, biotech, tourism — everything goes up.
This is the easiest tell: money rotates from leaders into laggards. The names that led the main stage stall or start falling, while stocks that did nothing all year suddenly limit up day after day.
Why? Because the leadership got expensive and money starts hunting for whatever hasn't moved. The reason for buying shifts from earnings growth to storytelling — transformation, themes, narratives — with nothing visible in the filings.
You'll notice a contradiction: everyone is making money, but the quality names you own aren't moving. That's when it becomes very tempting to chase the small caps that are flying — usually the most expensive lesson available.
Technical warning signs
Short-term returns remain strong while the structure becomes inconsistent. The index may reach a new high as participation shrinks, the 60-session median fails to confirm, or fewer stocks stay above long-term averages. That divergence means the final advance may depend on fewer names.
Huge volume with the index going nowhere. Volume/price divergence means somebody is distributing.
Deteriorating breadth. The index makes new highs while the number of advancing stocks shrinks — the rise is being carried by fewer and fewer names.
How to participate
The conservative answer is: don't, or with a very small position.
The gains in a final stage are genuinely tempting, and it's often the steepest leg of the whole cycle. But the end rarely gives notice — it isn't a slow rollover, it's a day when things simply break, and small caps have no liquidity on the way down.
If you're going to play it, use tighter stops and smaller size than usual.
Reading which stage you're in
No single indicator answers this, but these signals together usually get you close.
Start with returns and participation
Read 20- and 60-session median returns, advancing-stock participation, and 120-/240-day breadth on the homepage:
- 20-day return improves first while 60-day and long-term breadth remain low → possible early stage, but it can still be a rebound
- Both returns turn positive while participation and breadth expand → closer to a main-stage environment
- The index or short-term return stays strong while participation, 60-day results or long-term breadth deteriorate → final-stage risk is rising
Who's actually rising
In the screener, run identical MA conditions against "top 150" and then "top 300" by market cap:
- Strength concentrated in the top 150, small caps quiet → early or main stage
- Top 150 flat while the top 300 lights up everywhere → classic final stage
Sector distribution
- Concentrated in financials and large caps → early stage
- Concentrated in one dominant electronics sub-sector, leader strongest → main stage
- Scattered across everything, no identifiable theme → final stage
Whether earnings keep up
Check the Monthly Revenue YoY column in your results:
- Leaders mostly showing positive growth → main stage
- Leaders with flat or shrinking revenue but rising prices → final stage
The honest part
The framework has limits, and not stating them would be misleading.
Stages are only clear in hindsight. In the moment you never know whether this is a pullback within the main stage or the final stage already ending. Anyone telling you "we're in the third wave of the main stage" is guessing.
Not every cycle has all three. Sometimes the main stage rolls straight into a bear market with no final-stage fireworks. Sometimes the early stage stalls and consolidates for six months before resuming. The market is under no obligation to follow the script.
Duration varies enormously. A bull market might run two years or eight months. Reasoning from elapsed time that "we must be near the final stage" is dangerous.
This is a framework, not a signal system. Its use is helping you understand what's happening in front of you and adjust your expectations and position sizing — not timing entries and exits.
If I had to compress it to one line: learn to wait in the early stage, learn to hold in the main stage, learn to leave in the final stage. The difficulty increases in that order.
Last thing
The most practical use may not be identifying which stage you're in, but noticing when your approach has stopped fitting the market.
If buying strong stocks keeps getting you whipsawed, the problem may not be your selection — the environment may have changed. If you find yourself wanting to chase the ones with no earnings behind them, that impulse is itself a signal.
When the market weakens, the first response need not be an immediate reversal. Reducing exposure, holding cash and waiting for the evidence to align again are valid actions. For volatile positions that remain, use the risk-management guide to keep each possible loss within a tolerable range.
Use this tool in line with your own investing experience.
Nothing here constitutes investment advice.