The stock market has been challenging and difficult to navigate of late. A story here, a tweet there can shift any gained momentum into reverse. The drops and pops are often disguised as misdirection, and just when we think there is some potential follow-through on a big day, all of a sudden the markets lose it. It's maddening!
Let me tell you, while technical analysis is not a silver bullet, it certainly provides strong clues and evidence to help one wade through the waters and not get bit by an unseen shark. However, it does take some good understanding, constant learning (repetition), belief in behavioral patterns and identification. But if you're willing to learn, you just might give yourself a chance to stay in the game.
Some technical indicators are very evident, others are opaque. Some require short timeframes, others a longer-term view. Put a collection of them together, though, and they start to paint a picture of direction, or at least a strong probability of it.
The most important indicator, of course, is price action, which for the S&P 500 had been a laggard for a while. Strikingly, other indicators, such as stochastics, moving average convergence divergence (MACD), volume and volatility were recently showing a bullish inclination, yet the price chart was not. Hence, our view was guarded until we saw a breakout, past 2750 on good turnover.
This S&P level was significant at several markers in the recent past, and waiting or selling positions following recent selloffs from 2750 or so would have saved some capital, even as the other indicators said buy.
Now we see the Russell 2000 and Nasdaq at or near all-time highs, with other indicators supporting the price action in tow. Should this in turn lift the Dow Jones Industrial Average and S&P 500? There is some good historical evidence for that, and that may indeed be the case if the technical condition remains positive.
Momentum is strong and can last for a while. Indeed, many have been surprised to see the Russell and Nasdaq exceeding all-time highs day after day. Following the technical signals early on (as in early May on the price breakout) would have had you on the right side of the trade. Stay focused on the time-tested technical signals, they won't often lead you astray.