Technical Analysis FOR Stock Market SWINGS AND TREND CHANGES

For an initial evaluation on short, medium, and longer term trend on the US stock market, Dave Keller's weekly SP500 PPO indicators provides a quick visual check with bull and bear markets labelled on each of those 3 timeframes. (There are also a number of charts below that main chart in the image but the chart below near the top of the page is the quick check to see where we are on our weekly investment based timeframe).

Dave describes this TA ... and again in this video but uses the RSI as well as the PPO/MACD to confirm trend direction. These videos are well worth watching to get an understanding of this simple stock market trend tecnical analysis system which you can then set up quite easily on your own trading platform, or on platforms such as Trading View.

If you're really keen Dave describes his multi-timeframe analysis below which supplements the analysis above to furnish us with probability based assessment of market direction...

Dave describes this TA ...

My Main Momentum TA Using RSA, MACD, and Moving Averages

The TA techniques below in this article are great add-ons for my main TA momentum indicator setup. 

Click this link to view it.

Longer Term Chart Patterns

STANDARD LONGER TERM TRENDS AND TREND REVERSAL

When the 50 weekly moving average points down I am also looking for further confirmation of trend change via basic trend reversal pattern of higher highs and higher lows turning to lower highs and lower lows (circled in the image below). In particular, you will also see a 'head and shoulders' pattern on the price action which is in itself a decent indicator of trend reversal. 

A clear head and shoulders pattern can be seen in the weekly SP500 chart below which formed at the top of the US stock market in 2022 before the green 50 week MA started its decline. When the price action breaks down below the 50 week MA after a topping pattern in formed on the weekly chart (head and shoulders or double M top or just a trend change lower low)

REVERSION TO MEAN

Another important factor is the 'reversion to mean' principle. Whenever price action gets over extended from the 50 period MA it always reverts back at some point in the future as can be seen above.

LONG TERM TRENDLINES (MONTHLY)

The chart below is a monthly chart covering a 30 year period of the SP500. Right at the bottom left of the chart, represents the year 1994 to 1995 which was a 'nothing burger' year where the market moved sideways for th e whole year. (This is highlighted on th ebottom left corner of the chart below). The blue curved line on the chart is the 50 month MA. Prior to 1994 the chart showed the price of the SP500 bouncing off the top of this 50 month MA going back to 1980 which is evidence of the long term drift upwards in stock market.

A bull market proper starts in 1995 right in the bottom left corner where it starts to rise aggressively. This was basically the 90's computer and personal computer 'revolution'. The pink trendline running through the middle of the chart running up to the top left is a long term 'support' line going further back to earlier 1980's secular bull market. The second highlighted section of the chart from the left hand side is the 2000 Dotcom market peak leading to the Dotcom crash where the next highlighted section shows intersecting with the long term pink trendline which continued to act as resistance...

... The Great Financial Crisis in 2008 highlighted took the price below this long term pink trend line which now started acting as resistance. This is classic trendline Technical analysis (TA) of price action and as we can see the levels are generally respected. We are simply drawing trendline from all of the major peaks and troughs to all of the other peaks and troughs to see where the trendlines point towards support and resistance.

The 2022 high pinged off the underside of this trendline, as highlighted above, and now we are approaching the trendline again (at the time of writing in 2025) which could set the SP500 around 6400 before placing it at risk of pinging off of it again. Many analysts thing there will be some form of significant pullback around this level.

This longer term TA  is worth paying attention to.

MEDIUM TERM TRENDLINES (WEEKLY)

The same monthly chart as above can be drawn on weekly chart below, which shows the longer term pink trendlines and the slightly shorter term trendline joining the 2008 GFC top with the 2022 top.

The weekly chart gives us more of an canvas to draw more recent trendlines. As you can see below, this shows us a clear rising wedge on a slightly smaller timeframe than the monthly, and can help fine tune any investment decisions to sell out some of the SP500 if we're invested. For example if the price action were to break down below the blue rising wedge it would be the first bearish warning sign with a probability of price dropping further...

LONG TERM (SECULAR) ICHIMOKU CLOUDS

The Ichimoku clouds indicator can be used on the monthly or weekly charts to provide us with a sophisticated signal for secular changes in price trends. We can take the 1950 to 1968 secular bull market in the SP500 below as a case study. It's a little hard to see in the chart below, but the The S&P500 price line is the darker coloured black and red line on the chart with the red when price was going down and the black when price was going up.

Without going into too much detail, when the blue line stays above the red line, and the price does not breach the green bullish cloud then the bull market is still intact and we can remain invested. But when the blue line crosses down below the red line and the price breaches the green bullish cloud then this is a big warning sign that a secular bear market is forming. This can be seen in the two smaller charts in the chart image below where bullish signal described above occurred at the start of the Dotcom crash and the great financial crisis in 2008. ...

MONTHLY CANDLE BEAR AND BULL 'RECIPES'

On the monthly chart below we can see the 'bear recipe' on the left hand side (steps 1 to 4) applying to the market top in 2022, signalling the start of the downturn that led to the 2022 correction of around 25%. You can see the first monthly red candle of 2022 in the chart 'printed' a lower low than the previous month and also closed below the low of the previous month... (step 1 and step 2). Then the very next monthly red candle in the chart 'printed' a lower low than the previous month and also closed below the low of the previous month... (step 3 and step 4). 

And the reverse is true for the bull recipe: -

1. Print a higher high

2. Close above the high of the previous candle.

3. Print another higher high

4. Close above the high of the previous candle (... although it took 4 months to achieve step 4 on the bull recipe. Can you identify which candle on the chart above achieved step 4?)

THE 21 MONTH 'KISS OF DEATH'

This is a longer term pattern that can be seen at major downturns in financial markets. I am looking for this pattern in particular when there has been some sort of bull run for over a year. It works like this...

1. After a fairly decent period on monthly price rises, a monthly price candlestick "closes" below the 21 month Exponential Moving Average (EMA). (The Simple Moving Average could maybe also be used here but the EMA is seen as being slightly more accurate).

2. The monthly candle 'price action' then reaches a low point, maybe after a month or two and typically reverses heading back up towards the 21 month MA and gets near to it ("Kiss")

3. The monthly candle 'price action' then reverses again heading back down below the previous low point. ("Death"). At this point the price action is showing long term weakness and is likely set for a period of decline.

This is illustrated above. Each candle is the price action for that chart (asset/stock) for a whole month. So as you can see there was a decent run up to a high point which lasted many months. The gold arrow at the top marks the high point. The next yellow line pointing down is (1) in the description above. The next two yellow lines pointing up is (2)... the 'kiss'. Then the next two yellow lines pointing down are (3)... ('death')

TRADING PATTERNS STILL APPY TO LONG TERM TRADES (A.K.A INVESTMENTS)

Shorter term trading patterns with success rates shown below can also be applied to longer term 'secular' charts for investors. The universe, nature, is designed in patterns and these patterns echo over short term or longer term cycles. 

Look for channels to form consolidation phase where neither higher/lower highs nor higher/lower lows are made but rather horizontal zone is formed with support resistance levels 

Look for rising wedge (typically bearish) to potentially make a trade down, but could also break out/up. If up then trade long… 

If we combine the quarterly 5 period MA with a simple RSI we can see that in general, the 5 EMA is acting as support in a secular rising market. When a negative (red) quarterly candle wicks or closes below the 5 EMA and is combined with the RSI crossing below 70 from an overbought position, it points to a period of decline in the stock market.  

The same time period shown above on the monthly chart shows that 5 MA acting more clearly as resistance in the declining stock market. The RSI of the monthly chart below also shows a strong relationship with the RSI coming down at the market tops from oversold positions. These represent 'exhaustion' points from multi-month bull runs where each monthly candle has hugged to upper-end of the monthly Bollinger Band but has reached a point where Bollinger Band gravity starts kicking in, The RSI comes down from oversold, and is then confirmed by the standard 12/26/9 PPO or MACD and the 5 period MA starts acting as resistance...

Short to Medium Term Fibonacci

Pullbacks almost always seem to follow the Fibonacci retracement levels. This can provide a good target for potential/likely downside price action before a continuation of a trend. They are drawn from major troughs to major peaks to reveal typical areas of support for the pullback...

Seasonal Patterns

Over the short to medium term, it can be useful to view the typical seasonal patterns as they play out time and again. This just gives us an idea where abouts we are during the yearly cycle. It's not a tool to predict where we will end up at the end of the year. We are collating clues here.. nothing more...

• SP500 seasonal

• SP500 volatility seasonal

• NASDAQ COMPOSITE SEASONAL (RISK ON)

• RUSSELL 2000 INDEX SEASONAL (RISK ON)

• S&P SMALLCAP 600 INDEX (RISK ON)

• FTSE 100 INDEX SEASONAL (UK)

The longer term chart for the SP500 below gives a better view of the longer term trend for US equities. You can draw indicators and lines straight onto the graph... go ahead... try it out...

Investing at Market Bottoms

Follow Through Days

A Common Patter seen at market bottoms known as "follow through days" has a good record for helping investors to optimise their re-entry into the stock market. On the daily chart of the SP500 below you need to see a daily candle on day 4, 5, 6 or 7 which is up 1.25% AND has a volume reading higher than the previous day. These candles are counted from the most recent daily low so you will of course need to see one or two positive candles in days 1 to 3. If the 1.25% follow through candle is just below 1.25%, down to around 1% it's still positive but back testing on this pattern is better if 1.25% is reached.