If you are an active investor, you might be wondering about the strength of the recent downtrend in the S&P 500. That's where ADX, a chart indicator that helps measure the strength of a trend, may shed some light. According to ADX, the downtrend may be gaining steam.
How ADX works
ADX is used to help determine how strong a trend is. Trend strength can be important as it can offer clues as to whether there is momentum behind a market move—whether that is up or down.
Consider a hypothetical stock that is rising in price. Would you rather own this stock if the uptrend were strengthening or weakening? From a technical analysis perspective, a rising stock in a strong uptrend may be more likely to continue rising, compared to a stock with a weakening uptrend. Conversely, a falling stock in a strong downtrend may be more likely to continue falling, compared to a stock with a weakening downtrend.
ADX helps gauge the strength of the trend. It’s a short-term indicator that can be used under any type of market conditions (e.g., bull or bear markets, high or low volatility, etc.), and it’s simply the mean, or average, of the values of directional movement (DM) lines over a specified period. DM lines are calculated using current high and low prices.
How to use ADX
ADX is a bounded oscillator, meaning its readings will fluctuate between 0 and 100. ADX readings above 60 do not occur frequently.
There are 3 lines in the ADX indicator. The most important one is the ADX line. In practice, most chart analysts believe a reading above 25 typically indicates a strong trend, and a reading below 20 usually suggests there is no trend—with no clear signal interpretation existing between 20 and 25.
A rising ADX line generally means that an existing trend is strengthening. If ADX suggests the trend is strong (i.e., ADX is rising), then trend-following systems—such as moving averages and channel breakouts—are expected to have more validity. Alternatively, if you see a falling ADX line, which indicates an existing trend is weak or there is no trend, you may not want to place as much value in the signals given by trend-following systems.
In addition, there are 2 other lines: A DMI plus line (sometimes shown on charts as DMI+ or DI+) and a DMI minus line (sometimes shown on charts as DMI- or DI-). DMI stands for directional movement indicator. Whereas the ADX line determines the strength of the trend, the 2 DMI lines complement the ADX line by helping determine the trend's direction.
The direction of the trend is interpreted as positive when the DMI plus line is higher than the DMI minus line. Conversely, the direction of the trend is interpreted as negative when the DMI minus line is higher than the DMI plus line. Based on the DMI plus line currently being lower than the DMI minus line, this confirms the direction of the trend as bearish.
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How strong is the current trend in stocks?
The top half of the chart above shows that price has been in a steady downtrend for several weeks. The bottom half shows the ADX, DMI plus, and DMI minus lines.
The ADX line in the S&P 500 broke above 25 on March 13, 2026, suggesting this downtrend may be gaining momentum.
Moreover, the DMI minus line is currently much higher than the DMI plus line, adding further weight to the thesis that markets are in a strong downtrend.
What to consider when using ADX
Indicators like ADX can be useful supplements to your overall investing outlook that should be based primarily on fundamentals of the global economy, the business cycle, and any other relevant factors. ADX is painting a mostly bearish picture, with the latest data giving investors something to keep an eye on. Readings over the near term could provide insight into the strength of the latest market trends.