There are stock market trends that can date back to over 100 years, and there are other stock market trends that emerge each and every year. These two time horizons cater to both the long and short term investor, but both can be viable in helping to design trading strategies.

One example of studying stock market trends that have been around for a while is by using technical analysis. Technical analysis is the study of the past to predict the future using graphs, volume and pattern recognition. Charles Dow, the founder of the Wall Street Journal compiled an entire theory of how the market and individual stocks move. Known as Dow Theory, these observations still exist today, and are used to measure and analyze stock market trends. While there has been countless studies and models constructed since the Dow Theory’s founding, not many others have stood the test of time. Other technical analysts such as Richard Shabacker, Richard Wycoff, W.D. Gann and Ralph Elliott all helped further pioneer technical analysis as one of the more reliable ways to measure and trade the stock market trends. Later on, such writers and Steve Nison and John Murphy brought classical technical analysis into a modern perspective. While a thorough knowledge of each of the Dow Theory is a worthwhile pursuit, it’s not a necessity in order to study the stock market trends.

An example of stock market trends that will fizzle out quickly are those based on what’s in the news today. While it’s easy to discount news as rubbish, it’s not always the most prudent thing to do. There will be a tendency when certain topics are discussed on the news for the market to react a certain way. For example, as I am writing this article in early 2012, the big topic is Greece and the bailout that may or may not come. Every time that this topic is talked about with a breaking news prelude, the market has the chance to get volatile. The key is what happens after the volatility subsides? Do we continue in the initial direction, or do we “fade” or go against the spike direction? While this might not last forever, it’s still a viable way or learning stock market trends and getting a feel for how the market reacts. Similar news events that become common for at least a little bit can also be followed and analyzed.

Some stock market trends last a while, while others just have a short shelf life. Either way, learning what makes them function and using them for all they are worth is the best value you can get from any of the stock market trends.

There has never been a more appropriate saying in regards to stock market trends as “history doesn’t repeat, but it does rhyme”. Studying historical stock market trends can give the savvy and smart investor a blueprint to follow as the market trades throughout the year. You must have an understanding of at least the basic stock market trends if you are going to use them to assist you in your trading.

The most important of the stock market trends to learn is analyzing directional movement of the market. When a market moves to the upside, it makes a series of higher highs and higher lows along the way. When a market moves to the downside, it prints a series of lower lows and lower highs. When a market moves sideways, it will often print matching or just arbitrary highs and lows as it fills out a range. Using any stock chart will enable you to recognize these swings and allow you to see for yourself which of the stock market trends the market is currently in.

Next, historical stock market trends such as knowing what months of the year the market performs best can be of great help with your overall planning of trades. While past performance is never indicative of future results, and these historical stock market trends are not perfect, there is a tendency for the market to perform better certain times of the year than others, and whatever the reasons are, history has to be respected. Having a calendar based input as a starting point can get you off to a good start, and can get you oriented in the proper direction before adding other layers to your decision making process.

Certain stocks will move in different stock market trends as they approach news and earnings releases. Always keep a calendar handy with earnings for the companies you follow, while going to their website to find out about conferences they are participating in as well as any developments that are newsworthy and can have an influence on the stocks movement. Be sure to track these thoroughly, and take note of how the stock acts leading
in and out of these events.

Overall, just learning a few of the stock market trends can go a long way to help your trading and investing. You shouldn’t stop at just the basics, but rather take the time to learn more of the stock market trends that help shape the market’s path for this year as well as those to come.

When you people talk about trading stock market trends, you will often times hear how they approach the market with a top down approach to select what stocks to trade. This allows the stock trader to go with the market, rather than against it. What exactly is a top down approach and how can it help me with recognizing and profiting from stock market trends effectively? 

When you use a top down approach, you are using a strategy that starts with the big picture and dials down to the inner elements, as you look for more information that assists you in making your trading decisions. To start out, you want to look at the major indexes. These include the NASDAQ 100, Russell 2000 and S&P 500. You can use the Dow Jones Industrial Average if you want to, but I’d rather use it for my next step.

Use the main three indexes to locate the current stock market trends in each. Are they moving in sync? Which direction are they moving? Who’s leading? Who’s lagging? These are all important questions to ask, and will need to be answered in order for you to identify the stock market trends that are present. If the small caps (Russell 2000) are leading, there is more speculation in the market, and that needs to be addressed. If the S&P 500 is leading, it can be a sign that the fund managers are looking to keep pace. If you learn the clues that the market leaves, you will have an effective understanding of the stock market trends.

Next, I take a look at the Dow Jones Industrials, Transports and Utilities. Dow Theory has been used for over a century to help identify turning points in stock market trends, and I like to see if these three brothers (or sisters) are in providing any clues.

I then go down to the sectors. I want to look at individual sectors for the most part. I want to see how Semiconductors, Biotechs, Drugs, Healthcare, Internets, Software, insurance, Banks, Brokers and the Cyclicals are acting. I take notes and look at which ones are acting stronger and weaker then the others, which give me a great idea of which side of the stock market trends I want to be on.

Finally, after I highlight which sectors are strong and weak, I take a look under the hood, and look at the individual stocks that make up the sectors. After identifying the directional opinion on the top stocks in the sectors, I highlight key support and resistance levels and use them for trading opportunities. I compile a hit list that journals the stock
name, the directional opinion I have formulated, and if I can target in, the entry and stop loss. I then use this list as my day to day work sheet and look to see if any of the analysis that I have come up with plays out.


While the above steps are just about the simplest way of identifying stock market trends there is, but don’t discard the effectiveness. Follow these steps and you will have a topdown approach for taking advantage of the stock market trends.