The Trend, Revisited

Once again, the news media are reporting new highs in popular stock market indexes.  Does this mean it is a good time to invest?  Or is it a good time to sell and take profits?

I have absolutely no idea.  What I can do is tell you where we stand relative to The Trend.  (For details, please refer to my earlier post on this topic.)  After a little programming, I was able to add an information box to my sidebar that shows:

  • the current price of the S&P 500 index (updated every hour)
  • the predicted value of the S&P 500 index based on The Trend
  • the percentage difference between the index and its predicted value
  • the number of days that the index is ahead or behind its trend line

The S&P 500 index increases, on average, 7.1% every year — some years more, some less.  Since the index often goes up or down 1% or more in a single day, small departures from The Trend are meaningless.  As I write this, the S&P 500 index is almost right on trend — neither “on sale” nor historically overpriced.  It could stay this way for years, or the index could plunge or skyrocket overnight.  But it will inevitably return to the trend line.

For what it’s worth.

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