• The three major US stock indexes closed higher at the end of May, but does that mean they turned bullish? 

• Technically speaking, all three turned bearish over the winter and spring seasons before rallying through last month's settlement. 

• The key question remains: Does technical analysis matter anymore? 

Speaking of US stock indexes, the three markets were in a holding pattern at the end of May. Given meteorological summer began on Sunday, June 1, it’s fitting the situation in US equities can be viewed as a series of summer reruns: 

• From a technical analysis point of view, are the three major indexes still in long-term downtrends? (From April 1, 2025)
• Does technical analysis even matter anymore? (From February 11, 2025)
• Is the idea of a normal business cycle outdated, or does it have merit? (From June 21, 2022) 

Let’s start by taking a look at long-term monthly charts for the three major US stock indexes at the end of May. Keep in mind my Market Rule #7 (out of 7) tells us, “Stock markets go up over time”. 

From a technical point of view, at least my technical point of view, the S&P 500 ($INX) remains in a major (long-term) downtrend, despite the higher monthly settlement at the end of May. The key level remains the all-time high of 6,147.43 posted during February. What brings me to this conclusion? Great question. It goes back to the previous 4-month low posted during the April meltdown as the Index dropped to 4,917.94. As I’ve talked about in the past, I view 4-month highs and lows as important momentum indicators. If the S&P is in a major downtrend we can point to the bearish spike reversal completed this past February. Did the Index complete a bullish spike reversal during April? No, it came up just short as it settled at 4,569.06, down 42.79 for the month. What if we apply the Horseshoe Proximity of “Close is close enough”? Well, that would change things and again raise the issue of technical analysis meaning much these days. 

The monthly chart for the Dow Jones Industrial Average ($DOWI) shows us something similar, a continued a major downtrend also despite a higher monthly settlement at the end of May. The key level is the all-time high of 45,073.63 from December 2024. As with the S&P 500, the Dow completed a bearish spike reversal last December before dropping to a low of 36,611.78 during April. This extended the March break of the previous 4-month low of 41,844.49 from January and was within sight of the bearish territory threshold of a 20% loss at 36,058.90. But it stopped and rallied to finish the month at 40,669.36, still down 1,322.40 from the March settlement erasing the idea of a Horseshoe Proximity. Technically speaking, I’m looking for the other shoe to drop over the coming months. Unless this past April was simply a carbon copy of what was seen during March 2020. But rather than a global pandemic, this spike was created by global political and economic chaos. Which is worse? It’s hard to say. 

Though its monthly chart looks similar, I could make the argument the Nasdaq ($NASX) completed a bullish spike reversal at the end of April before extending its rally through May. What’s the difference? Here we see the Index fell to a low of 14,794.45 during April, down 27% from its December 2024 high of 20,204.58, before settling at 17,446.34. This was up 147.05 (0.9%) for the month. While not a huge gain, any higher close counts as a bullish reversal, from a technical point of view. Unless we again apply the Horseshoe Proximity and conclude it was near enough to a lower close to NOT be a bullish reversal. I think you can begin to understand my growing concern with technical analysis (see below). As with the other two indexes, the key will be how the Nasdaq behaves once it draws near its high from last December. 

For the record, I continue to agree more with Warren Buffett’s thoughts on technical analysis, “I realized that technical analysis didn’t work when I turned the chart upside down and didn’t get a different answer.”