Analyzing monthly stock market trends uses the S&P 500 charts to indicate important trend lines. Trend following is a proven strategy to beat the market and grow your stock portfolio. Technical analysis provides the tools to analyze and identify trends in the stock market. Since the S&P 500 trend line chart is the one used by professional traders for their analysis, it is important to understand how it is performing.
The analysis of the S&P 500 trend line starts with the 20-year monthly view of the S&P 500 chart. Next, we examine the weekly chart of the S&P 500 trends to get a shorter-term view. Finally, we analyze the one-year daily chart of the S&P 500 trends to get an even shorter-term view. On each version of the charts of the S&P 500 trend line, the view and the value of the indicators change, as we move from a monthly to a weekly and then a daily chart.
Starting with the monthly view of the S&P 500 trend chart, the bull market of the last five years turned down, as the index fell below the 24-month exponential moving average. The Relative Strength Indicator (RSI) is below 50, indicating a downtrend is in place. The Moving Average convergence Divergence (MACD) is also below zero, a sign stock market trend has reversed and we have entered a bear market. Finally, the Slow Stochastic fell through zero, another sign of a bear market.
The analysis of the monthly trends of the S&P 500 chart shows we remain in a bear market with key resistance at the 24-month exponential moving average. In addition, support at the 25 year rising S&P 500 trend line has been tested and held, so far.
The three-year weekly S&P 500 trend line chart shows more closely the transition from a bull to a bear stock market. So far, the descending trend line and the 50-week moving average are the primary resistance levels for this view of the bear market.
As expected, the trend of S&P 500 chart fell through support at the 800 level and fell to the 650 area. The S&P 500 trend then reversed course and is trying to push back through the 800 level, which is acting as resistance. The next important level is the small descending trend line at the 850 area. From the chart, it looks like the S&P 500 trend line will continue to rise through these resistance levels and test the 50-week moving average. It will be a number of weeks before we see a test of the 50-week moving average.
RSI is below 50 indicating a downtrend remains in place. The MACD turned up through the nine-week moving average, a buy sign and it is still trending up, which is a positive sign. Slow Stochastic turned up through 20, a sign the trend on the S&P 500 chart will continue to move up.
Long term, the trend line of the S&P 500 chart is still down. The weekly pattern indicates that we turned up after falling to the 650 level. For now, the chart of the S&P 500 trend line indicates the most likely case is we will see a test of the 50-week moving average.
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