Technical Analysis: Use Strong Stock Market Days to Sell, Charts Suggest

Traders working at the New York Stock Exchange (NYSE) on Dec. 18, 2025.

As many market participants anticipate a year-end rally, there are mounting indications that such an outcome is far from assured. Investor positioning appears increasingly stretched, with multiple reports referencing cash levels near extreme lows. If investors are already effectively “all in,” the question becomes, who is left to provide incremental buying power at current levels?

At the same time, margin debt continues to climb, reaching levels not seen in years, a sign of elevated leverage and risk appetite rather than abundant dry powder. Persistent weakness in oil prices also raises important questions. Is this purely a supply-driven phenomenon, or does it reflect softening demand and an early signal of economic deceleration?

Meanwhile, leadership appears to be fraying. The AI trade that has underpinned much of the market’s advance shows signs of deterioration, with momentum waning. Look for some tax-loss harvesting into the end of the year as some of these trades unwind. While none of these indicators is definitive in isolation—and certainty only comes with hindsight—the accumulation of such signals warrants attention.

Ultimately, these concerns must be validated through price action. Price is the final arbiter. It doesn’t lie, it cannot be revised, and it is how market participants are ultimately judged.

The S&P 500’s monthly chart may be beginning to reflect these growing tensions. The index is currently on a seven-month winning streak dating back to April, having rallied more than 2,000 points from those lows. Candlesticks proved useful in identifying the advance, as April printed a doji candle, often an early signal of a potential trend change from the prior direction.

More recently, November registered another doji, a pattern that can also display fatigue and rising indecision after an extended move. Notably, volume has trended lower during the rally.

From a longer term perspective, the S&P 500 has touched its 50-month simple moving average only five times over the past 15 years. While the index came close to that level in April, it didn’t make direct contact. Today, the 50 month moving average sits roughly 1,700 points below current levels. This isn’t a call for an immediate or dramatic drawdown. It is an observation that as time progresses and the moving average rises, a test sometime in 2026 becomes increasingly plausible.

In that context, maintaining an open-minded and price-driven approach remains essential.

The S&P 500 was up 0.8% at 6831.81 in late afternoon trading on Friday.

Monthly S&P 500 doji candle marked the low in April. See if Novembers has the same effect on the rally.

Interest rates have also been a notable headwind for equity indexes. On the daily chart, the iShares 20+ Year Treasury Bond ETF continues to signal weakness, reflecting rising long-term yields given the inverse relationship between bond prices and interest rates.

The fund is now below its 200-day simple moving average, a level that has historically marked an unfavorable regime for the fund. Notably, it briefly reclaimed the 200-day on April 4 but failed to hold above it, with subsequent price action deteriorating quickly thereafter. Thursday closed right at the secular line. More recently, the ETF broke below the $88.50 pivot associated with a bearish head-and-shoulders formation, a development that implies a measured move toward the $85 area.

That $85 zone carries significant technical relevance, having been tested on four separate occasions between January and July, and should act as an important area of price memory and potential inflection.

The iShares 20+ Year Treasury Bond ETF was trading down 0.5% at $87.46 on Friday.

Thursday traded right up into 200 day simple moving average and is backing off Friday.

At times, the launch of a novelty or speculative exchange-traded fund has served, in hindsight, as a useful marker of market excess. The Roundhill Meme Stock ETF may prove to be one such example. The fund began trading in early October and, after a brief push above the very round $10 number, is now down roughly 48% from its Oct. 15 peak.

The technical deterioration was swift. On Oct. 16, the ETF fell 9%, completing a bearish evening star pattern. What followed was an especially soft five-week losing streak, with each weekly close landing deep in the lower half of its range. A bullish morning star on Nov. 24 produced a short-lived 11% rebound, but that bounce quickly morphed into a bear flag rather than a durable reversal. With price now well below the $7 pivot, the setup suggests the potential for another decisive leg lower, possibly unfolding in the first half of 2026.

The Roundhill Meme Stock ETF was trading up 11% at $6.63 on Friday.

Break below bear flag should weigh on this new exchange-traded fund into year end.

In markets like this, strength may be less an invitation to chase, and more an opportunity to sell.