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The One Stock Market Trend You Need to Know

The stock market trend is up. To know that, all you have to do is look at a single chart. Tune the rest of the noise out.

In a world dominated by spin, alternative facts and self-serving narratives, it’s good to have one incontrovertible thing you can trust. And for growth investors, that one thing is the stock market trend.

You’ve probably heard the old market proverb that “the trend is your friend.” And that’s true. For growth investors, knowing which way the markets are moving is the single most valuable piece of information there is. It’s right up there with a sailboat captain knowing which way the wind is blowing or a surfer knowing whether the surf’s up.

The trouble with bull markets is that there are so many reasons to temper your optimism. The longer a rally persists, the more investors sitting on the sidelines worry that they’ve missed it, or that it’s been going up so long it must be ready to roll over.

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People trying to grab your attention on financial sites know this, and one of the most reliable pieces of click-bait is a warning of an impending financial collapse. And they’re happy to tell you that the only reasonable thing to do is to buy gold or options or a basement full of food and water.

If you want to know what’s really happening, here’s what to do.

First, look at the daily chart of the S&P 500 with its 25-, 50- and 200-day moving averages. If the index is above its moving averages, the stock market trend is up. Period. This means that the odds are in your favor and your growth stocks have a good chance of moving higher.

Here’s what that chart looks like right now.

The stock market trend is up. Just look at this chart of the S&P 500.

You can see the last couple of months of the S&P’s August–October correction, the post-election rally, the December–January flat patch, the February run higher and the mild correction that has afflicted the market since March began.

You can also see that the S&P, after vaulting past its moving averages in November and ushering in a new bull market, has been repeatedly buoyed by its 25-day moving average (the green line). And you can see that the index has yet to dip below that average this month. And that’s the hallmark of a bull market.

Sure there are things to worry about. Cabot’s growth analysts were worried at the end of November and we were worried during the sideways grind in December and January. And we’re worried now that the market has been flagging for a couple of weeks. Worrying is the natural state for growth investors, and when growth investors stop worrying (which happens only when markets are soaring higher and higher and people start to say things like “it’s different this time”), those of us who know market history get really worried.

But right now, Cabot Growth Investor is about 85% invested and Cabot Global Stocks Explorer is 90% invested. And that’s a vote of confidence in the stock market trend.

So if you want one thing about the market that you can trust, go to your favorite source for charts and let the dance of the indexes and their moving averages give you the confidence you need to put your money to work. (This works for the Dow, the Nasdaq, small caps and every other class of stocks.) And when the market corrects to the point that you need to start selling and go more heavily into cash, thank the chart that tells you the absolute truth.

And if you’d like to get advice from a team of growth stock advisors who have been doing this successfully for a long time, you can always find us and get our investing advice at


Paul Goodwin is a news writer for Cabot’s free e-newsletter, Wall Street’s Best Daily.