As I mentioned in my previous post, now that I have the opportunity to actually invest a bit of money into the stock market, I am suddenly concerned about whether this is the right time to do it. A large portion of people claim that trying to time the market is a fool’s errand, and certain approaches to market timing confirm this.

However, I don’t believe it’s entirely impossible to use different criteria to get a general temperature of the market before making an investment decision. Today, I thought I would try my own, somewhat non-scientific approach of comparing the growth over the past few months to similar growths in the past decade. Here is what I came up with (click for a full version):

I have circled in white advances in the stock market which have a similar growth to what we’ve experienced over the past few months. This is by no means exact, but all of these growth spurts were similar in terms of the percent gain as well as the time period.

Of the seven periods of growth I found in the past decade, all but one were followed by a several month period of either decline or stagnation in the market. The one period that was followed by another gain just happened to be in the middle of the dot-com bubble, so you might even discount that one.

Does this mean anything? I’m not sure. I am a computer science major, and only have about four months of real, solid knowledge about the stock market, so for all I know this could mean absolutely nothing. Just going with common sense does make me hesitate to invest in a market like this, however. I’ll be sure to print out this graphic though and show it to one of the resident stock analysts here, to see what someone who really knows their stuff has to say.

And as always, everyone else’s opinions are welcome as well!