Technical analysis. Some people swear by it, others consider it a kind of voodoo you shouldn't do. I used to fall into the second category (not anymore), and therefore feel I can write about the subject without real bias. As any other indicator, technical analysis has both merit and limitations. The key is to find the sweet spot in between. Here is a quick rundown of what, in my opinion, technical indicators do and do not work right now. What used to work, but doesn't work anymore Trend-line support: This is the most basic technical-analysis tool. Trend-line support was very effective during the first years of this bull market. A simple trend-line break warned investors of the two deepest corrections (2010 and 2011) of this bull market. But the trend line magic stopped working thereafter. Trend-line failures in 2012, 2013, 2014 and 2015 proved to be false sell signals. For the past couple of years, I've used recoveries back above previously broken trend lines as buy signals, which has worked better. Elliott Wave Theory: Elliott Wave Theory (EWT) became popular during the crash years, as the doomsday scenario of many Elliotticians finally became reality. However, the longevity of this bull market exceeded the expectations of many Elliotticians, and it's become trickier to label the recent market action. EWT still offers unique insight that can't be found anywhere else. If you think of various market indicators as a team (an advisory team), EWT is more of a supplemental player than MVP. Dow Theory: Off and on for the past few years, Dow Theory has been quoted as reason for an imminent correction or bear market. The latest avalanche of Dow Theory doom-and-gloom predictions hit earlier this year, when the Dow Jones Transportation Average (and Utility Average) peeled away. Although the Transports' underperformance is a bearish divergence, it is not an actual sell signal. Both Industrials and Transports have to reach new lows for a sell signal. The significance of the sell signal partially depends and how low the Industrials fall (see different green support lines). Trend-following indicators: Trend-following indicators killed it in 2013 and much of 2014 because the up trend simply didn't stop (i.e., the S&P 500 didn't drop below the 200-day simple moving average from Nov. 11, 2012 to Oct. 13, 2014, and stayed above the 50-day simple moving average for weeks or months at a time). This year is much different. Anyone trying to catch the next best trend ended up with many incremental losses and mounting frustration. What still works The S&P 500 has been stuck in a six-month trading range. There's been no single one great indicator that's gotten every twist and turn correct (if you know of one, please let us know). The short-term technical indicator I've found most helpful recently is a combination of long-term resistance lines (top panel of chart) and short-term momentum (RSI – lower panel). The S&P 500 has not been able to stay above the ascending red line and didn't even touch the horizontal red line yet. Both lines go back many years, even decades (for a long-term look at both trend lines, go here: S&P 500 Chart: Most Persuasive Argument for a Bull Market End Yet, But ...). RSI has clearly defined the recent trading range. RSI in the red zone coincided with pullbacks while RSI in the green zone led to bounces. Four are better than one Like the stock market, individual indicators go through boom and bust cycles. Not every indicator works in every environment. Just like investors diversify their portfolio, it makes sense to diversify market indicators. I personally combine technical analysis with sentiment research, seasonal patterns and supply and demand data. When all four gauges point in the same direction, we've got a strong signal. Of course, sometimes the combination of indicators is a mixed bag filled with contradictory signals. This was the case already in March, when I wrote via the Profit Radar Report that: " The S&P 500 today is exactly where it was Nov. 18, and there's no indication that the up and down zig-zagging is coming to an end." Sometime it's nice to know when to just sit and wait. It's now June, and there's still no clear edge. However, an indicator consensus is starting to form. A move above the ascending red trend line (shown in the first chart) may draw in a few more buyers, but the weight of evidence points towards a rough July/August. marketwatch