As the euro continued to climb, the MACD-His was declining, eventually reaching a low in September.
This weekly euro futures chart begins in March 2009 with the MACD-His already in positive territory.
The MACD-His turned up in September, forming a secondary high and a negative divergence, line 1.
The MACD-His dropped below the zero line four weeks after the euro made its highs.
Seven weeks after the highs, the MACD- His dropped below the zero line (line d).
To many, the two lines that make up MACD suggest that a complex algorithm is involved.
When October 16 arrived, short-term MACD was on a sell signal indicating a correction was underway.
FORBES: Market Correction Started In September, Has Room To Get Worse
In that event, the re-entry is delayed until MACD triggers its next buy signal.
FORBES: Market Correction Started In September, Has Room To Get Worse
Therefore, the MACD is essentially a momentum oscillator that is derived from multiple moving averages.
To confirm a weekly bottom, the MACD-Histogram needs to move above the resistance (line d).
The MACD-Histogram turned positive last week and will move further into positive territory this week.
The MACD-Histogram, which measures price momentum, crossed back into positive territory in early August.
The histogram shows whether the MACD line is above or below the dotted line.
MACD-Histogram has dropped below the 0 line, which indicates the short-term momentum is negative.
He sees a buying opportunity if the MACD for the major averages puts in a higher low.
This second strong negative divergence in the MACD-His preceded the sell signal by three weeks, line e.
The positive divergence and sharp improvement in the MACD-His in early April suggested a crossover was imminent.
The November highs in GLD were not confirmed by the MACD-His, as it formed lower highs, line 5.
More importantly, as yields were making lower lows (line c), the MACD-Histogram was making higher lows (line e).
This signal was short-lived, and just eight weeks later, the MACD-His had moved back above zero line, line e.
The MACD-His was even weaker in September, and the negative divergence (line f) is consistent with a major top.
The drop in the MACD-His below the zero line last week (see arrow) is also a sign of weakness.
The MACD-His, however, made its low in February and then started to rise, diverging from the MACD, line 2.
The MACD declined into April, making a series of lower lows, line 1.
The two lines are referred to as the MACD and the signal line.
These negative MACD formations confirm the MACD sell signal generated on April 14.
He seemed pleasantly surprised at my praise for the MACD, as he had moved on to other methods of analysis.
Adding an additional indicator, such as the moving average convergence divergence (MACD), to time market entry and exit further improves returns.
An even more cautious approach is to wait for a bullish MACD formation to appear, such as a rising double bottom.
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