READING THE STOCK MARKET’S TEA LEAVES

Technical analysis searches for clues in price patterns and historical data. Take a look at what these indicators are saying now.

- BY ADAM SHELL

WHAT direction is the stock market headed next?

Nobody, of course, has a crystal ball. And the market can’t converse with you like ChatGPT can, so it can’t warn you of trouble ahead or confirm that a bull market is alive and well. There are tools, however, that can help you read the tea leaves and better gauge the market’s next move.

Fundamental stock market indicators such as corporate earnings growth and price-earnings ratios, and economic data such as gross domestic product, interest rates and inflation, tell only part of the story. A more complete picture of the market’s health includes analyzing visual clues found in Wall Street charts that focus on price action, for example, or market breadth (a measure of how many stocks are participating in a rally or selloff). The research strategy is known as technical analysis.

This type of evaluation provides key market intelligence. Technical analysis tells you whether a broad index such as the S&P 500 is in a sustainable uptrend or in a downtrend. It shows whether a stock’s price momentum is strengthening or fading. And it reveals potential directional pivots. “Technical analysis is a framework for identifying what the current market trend is and the likelihood of it continuing,” says Adam Turnquist, chief technical strategist at LPL Financial.

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