Follow the Trend

Over time, the stock market and individual securities, follow general trends and these trends are identifiable. The idea is that you want to be more fully invested in stocks when the market is above its long-term trend line (200-day moving average). And, you want to be safely positioned when the market is trending downward.

The Big Charts chart below illustrates the S&P 500 Index for the last five years. The black line outlines the daily prices of the S&P 500 and the orange line highlights the 200-day moving average or trend line. As you can see a majority of the uptrend was in 2003 and the first part of 2004. This was the time to be in the market.