Doug Short, here:
The regression trendline drawn through the data clarifies the secular pattern of variance from the trend — those multi-year periods when the market trades above and below trend. That regression slope, incidentally, represents an annualized growth rate of 1.75%.
The peak in 2000 marked an unprecedented 150% overshooting of the trend — nearly double the overshoot in 1929. The index had been above trend for two decades, with one exception: it dipped about 12% below trend briefly in March of 2009. But at the beginning of April 2014, it is 80% above trend, up from 76% above trend the month before. In sharp contrast, the major troughs of the past saw declines in excess of 50% below the trend. If the current S&P 500 were sitting squarely on the regression, it would be around the 1033 level. If the index should decline over the next few years to a level comparable to previous major bottoms, it would fall to the vicinity of 500.
Click the link for his charts.
