Sometimes I think this is the perennial of writer topics. I'm going to weigh in on both sides. 1) Yes, of course you should write what you love, but also 2) paying attention to the market isn't bad either.
When I wrote my first book, there wasn't a paranormal boom yet. I got lucky with timing. Mostly. I had seen adult urban fantasy & paranormal romance booming, so it wasn't a huge surprise that a YA boom happened. I also had a daughter who had grown up with Harry Potter (*inserts sigh of love*) and was suddenly looking for "something magic and stuff" but for older readers. I wrote Wicked Lovely for her.
Like Jen, I watch & make predictions. I subscribe to Bookscan, watch adult & MG market, and I attend industry conferences to see what books houses are pushing. I also watch the international market bc I saw the impact of international sales on my US deals. I disagree with a lot of industry experts on "what's going to be hot," too, so I trust my instincts. There's no way to truly predict, but it's a fun game. (I also do this with marketing & PR tactics. Again, it's because I find it fun to do so.)
Does that mean "write to the market?" Nope. It means that it's on the list of things I consider when I get out my folder of ideas & story starts. My criteria are:
1) is this fun to me? (+1 if yes +2 if YES)
2) is it different than the last book? (+1 if yes)
3) does it achieve something in my master career goals list (+2 if yes)
4) does that fit in the market now? (+1 if yes)
I think people get confused on the 4th one. It's not writing to the market to hold off on an idea for a while. Markets shift, cycle, and re-cycle. If I have an idea that is overdone now (i.e. vampires), I might hold off bc the same book that gets good shelf space in a low vamp market will get shoved in the stack of other read-alikes in a high vamp market.
A number of years ago, when I first started writing, I posted a very similar request for discussion on another online writers' forum. I have a background in business, and I was simply curious about what was hot and what was not. I actually made it very clear in my post that I was working on a project I loved, and had no intention of being swayed by shouts of "Trend!" -- I simply wanted to learn more about the industry. Imagine my surprise when I returned to the thread the next day to find a dozen or so extremely negative responses, several of which literally told me that I would "never make it as a writer" if I insisted on being a "slave to trends". Wha, wha, what?!
It's, imho, another version of the Literary v Genre or Artist vs Commercial attitude. I love story, lit, genre, and art. I also do this as a business. I have kids and parents, mortgage, college funds. This is my JOB, as well as something I love. Thinking practically about the business aspects of being a writer is no different than thinking practically about being a lawyer or a bartender. We have to make choices to balance what we do in the career we enter. I worked at rough bars bc it paid better, but there were bars I refused to work at even though it would've been less hours for more money. Some lawyers are broke doing legal aid; others make bank doing high end criminal defense. Even job requires making business & ethical/personal choices.
Remember too that so called "trends" are created by the industry as much (more?) readers. Book A does well? Adjust the cover copy on these 7 others so they sound similar. Covers? Oh, that sold so we should put X on every cover. That agent sold a book we passed on that was HUGE? Buy whatever she brings us next. We lost the auction on that vampire/angel/flapper/adventure/spy/etc book? Quick! Get one like it. Oh, two of the other big 6s have a vampire/demon/cute puppy/future/plague book? We better get one too.
When you boil books to their bones, the "similarity" that is labeled a trend mightn't be so accurate. Frex, any book with supernatural creature? Reviewers & bloggers quickly call it a Twilight read alike--so does the flap copy. Any book with wizards? or school? Harry Potter read alike. Every possible permutation of dystopian, future, alt-past, fighting, war? All HG read alikes.
All the while YA & MG are expanding rapidly. Subgenres are popping up within it, but journalists need a topic and "what's hot?" draws attention so they label trends.
The real questions, imho, are:
1) Do you want to write it?
2) Is there an audience for it now?
If both are yes, I say go for it. If either is yes, you might still go for it. If #1 (want) is a no, stop. If #2 (market) is a no but #1 (want) is a BIG YES, I say go.
Just my .02 of course...