For 2007 my prediction for the S&P 500 is for the market to close the year between 1350-1375, a decline of 3-5%.

As the year started my down a little prediction looked very wrong and now it doesn’t look as wrong but we have a long way to go.

The video I made for that prediction is an interesting mix of things I look right and wrong about. I actually mentioned LEND by name as being a candidate for sub-prime trouble, go figure.

You are probably aware that the S&P 500 closing at 1406 last night puts it in the red by almost 1% for the year. Chances are your account is either still up a little or it is down a little (obvious statement) but there is something to consider. Occasionally the stock market has a down year, in fact 28% of the time the market has a down year. I don’t know if this will be one of those or not but if it is, well ok, that is not new, it has happened before and is guaranteed to happen in the future.

It might be tough for me to convey how this action repeats over and over and so have no emotional response to any of it. It is also difficult for many investors to realize this is normal market action but it is normal. The context of this statement is that if you have a diversified portfolio and completely blow every aspect of protecting against a typical bear market decline (20-30%) the market will bail you out by going up at some point. Earlier this summer we made back the high on the S&P 500 after it cut in half a few years ago.

Some one will confuse that with my saying don’t ever sell anything which is not the case, I’m just pointing out the normal context in case you really get it wrong.

Because declines happen regularly, the idea of having a “get defensive” strategy planned out ahead of time and just sticking to it makes it easier to deal with. If you are one to take any defensive steps you should also realize that it is unlikely you will nail the trading exactly right. That’s ok its normal.

Last 5 posts by Roger Nusbaum

• The Big Picture for the Week of November 15, 2009 - November 14th, 2009
• Process Drilldown - October 23rd, 2009
• Sunday Morning Coffee 10-18-09 - October 18th, 2009
• A Little Followup From This Morning - October 8th, 2009
• Wednesday Roundup - October 7th, 2009