Unexpectedly Intriguing!
February 8, 2012

Stock prices, as measured by the S&P 500, continued to behave in a very orderly fashion through January 2012, rising from an average level of 1243.32 in December 2011 to 1300.58.

This month-over-month change puts the overall level of the S&P 500's index value at the upper end of our forecast range for the month. Or would have done so, if we had not discontinued publicly offering our forecasts!

S&P 500 Index Value vs Trailing Year Dividends Per Share, December 1991 Through 31 January 2012

The reason stock prices are rising is because investors are expecting a rising level of dividends per share to be paid out in the future.

Expected Future Trailing Year Dividends per Share for the S&P 500, as of 8 February 2012

In response, stock prices have swung from the low end of our forecast range to the high end.

With the stock market behaving in such an orderly fashion, it may now be possible to fully switch over to our statistical control chart-inspired methods of monitoring the market. We haven't been able to do that since December 2008!

What that means is that we can now apply additional tools to project both where the market may be heading and whether the market will continue to proceed in an orderly fashion.

For investors, that matters because periods of order in the stock market, where the change of stock prices with respect to their underlying dividends per share may be described by a Gaussian, or normal, bell-curve type statistical distribution typically coincide with sustained increases in stock prices.

Our final chart below identifies the various periods of order that have existed in the stock market since June 1954 - almost from the very beginning of the modern period of the stock market!

Order and Disorder in the S&P 500, June 1954-June 2009

The best news is that any dark cloud on the horizon will likely have a silver lining: previously, before order has broken down in the market, the market has given advance notice, which we have observed in the form of increasing volatility as measured against our statistical control chart-inspired backdrop.

Which means that we have the ability to do the hardest thing in investing - to put an exit strategy for our investments into effect when it matters most: before stock prices take a dive!

Labels: ,

About Political Calculations

Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:

ironman at politicalcalculations.com

Thanks in advance!

Recent Posts

Stock Charts and News

Most Popular Posts
Quick Index

Site Data

This site is primarily powered by:

This page is powered by Blogger. Isn't yours?

CSS Validation

Valid CSS!

RSS Site Feed

AddThis Feed Button


The tools on this site are built using JavaScript. If you would like to learn more, one of the best free resources on the web is available at W3Schools.com.

Other Cool Resources

Blog Roll

Market Links

Useful Election Data
Charities We Support
Shopping Guides
Recommended Reading
Recently Shopped

Seeking Alpha Certified

Legal Disclaimer

Materials on this website are published by Political Calculations to provide visitors with free information and insights regarding the incentives created by the laws and policies described. However, this website is not designed for the purpose of providing legal, medical or financial advice to individuals. Visitors should not rely upon information on this website as a substitute for personal legal, medical or financial advice. While we make every effort to provide accurate website information, laws can change and inaccuracies happen despite our best efforts. If you have an individual problem, you should seek advice from a licensed professional in your state, i.e., by a competent authority with specialized knowledge who can apply it to the particular circumstances of your case.