The 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.

Rising investor confidence also indicates a rally, and it is perhaps more powerful than any economic indicator because when investors believe something is going to happen (a rally, for example), they tend to take action (purchasing shares in order to profit from expected price increases) that actually turn expectations into reality. Although it is an objective concept, investor sentiment shows through in mathematical measurements such as the put/call ratio, the advance/decline line, IPO activity, and the amount of outstanding margin debt.

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