Long-term stock market trends are a great opportunity and change less than the weather
Stock market trends may tell you something about the future. But unlike weather forecasts, stock market trends say more about the coming months and less about tomorrow. They also do not predict exact numbers, like weather forecasts predict the temperature and wind speed for the coming week. But they do provide you with something more useful.
To show why stock market trends are more reliable and useful than long-term weather forecasts, we consider:
- The trend period
- The trend direction
Like a weather forecast predicts temperature, rain, sun and wind for the coming hours, day or week, stock market trends consider the short, medium or long-term.
- Long-term trends last several months to years
- Medium-term trends could last several days to a number of weeks
- Short-term trends are expected to last from a few hours to a few days
Afterwards it is always easy to see how long a certain trend lasted. Afterwards is maybe interested for analysts, but less for investors. As an investor, you like to see what you can learn from the trend about the future. Note that we do not predict trends… we recognize trends.
Long-term stock market trends are more reliable indicator for the longer term future than short-term trends are indicators for tomorrow. The long-term trend changes direction on average only once per two or three years. When you recognize after a few months a direction in the long-term trend, you still have many years to capitalize on this trend.
In the short-term, stock markets are fluctuating enormously. To be able to capitalize on short-term stock market trends, you would have to be able to recognize them very early and quickly. We have not come across any methodology that can do this reliable.
Current Direction of the Stock Market Trends
Stock market trends tell you the direction of the current trend. They do not tell you how high or how low this trend will go. Only the future can tell you that.
But knowing the direction of the trend is enough to be able to capitalize on it. You know that it is more likely than not that the current trend will continue. What you do not know is how long it will last and how much profit you can make from it. That is the uncertainty that we need to learn to live with.
At any given time, different stock markets can show different trend directions. And even for the same market, different indicators could signal a different trend direction, especially around the beginning and end of trends.
Therefore, I cannot provide you with a general answer here on what the current stock market trend is.
Long-term weather forecasts are useless. Long-term stock market trends are a great investment opportunity.