Paul,
is there a trendline that is long-term sustainable? I suspect the 1994 linear SPX trendline at about 1200 is
I don't think any linear trendline means a lot beyond a couple of years, though I suppose it could be considered a conservative approach. I found data from Yahoo goes back to 1950, which is farther than I had looked at before
quote.yahoo.com^SPX&d=my
Figuring 50 years should be long enough to get a good sense of the sustainable trend, I downloaded the monthly data, and used the monthly "pivot" values (high + low + close)/3 to smooth things out a bit. A regression line that fits what you see in the linked chart is presently at a level so low I wont even speak it. Allowing myself to be a bit more optimistic I looked at the last 25 years, and then went back a little further to the dip in September 1974, which actually flattens the trendline a bit and lowers the projection compared to October 1975. The regression fit to that data on the log plot is currently at 1140, somewhat below your 1200 mark. If we get to the point of breaking those levels, then I'll figure out where the full 50 years of data puts us.
I think the 25 year regression line is sustainable. We may have to get below it again at some point. It doesn't have to happen in a month or two, but of course that is possible. It could take several months, giving the line some time to rise to meet the data. During that time we could be stuck in a trendless market. At the rate the line is rising, if SPX does not fall further the line will catch up in 21 months, more like 18 if you consider that adding more data above the line will increase its slope. Not a pretty picture either way; SPX falling to the line, or drifting around for another year and a half.
Guess we better start looking at shorter term lines to sustain some optimism. Let's see.. how about 10 years, from October 1990. That looks a lot better! We are now below, where that line was 4 months ago, and it's time for a rebound <ggg>
Dan |
