Stock Market: Put a MACD Crossover on your Holiday Shopping List

In late February, the Shanghai stock market reminded us how inter-related the world’s markets are when its 9% plunge reverberated around the world and concluded with the DOW closing down 400 points.  The market recovery started once all three major market indexes (DOW, S&P 500 and NASDAQ) flirted with their 200 Day EMA

The July/August credit induced correction ended in the same fashion.  In that case the DOW was stubborn.  It would take it an additional 14 days before it followed the S&P 500 below the dreaded 200 Day EMA.

If you recall leading up to the July correction the hot money was piling into the DOW stocks because of their international growth profiles.  Technology has been the most recent bastion of safety in particularly the consumer electronic companies like Apple and Research in Motion.  Last week they were taken out a shot to the tune of 12% and 10.8% respectively.  The NASDAQ is now in sync with its brethren as it approaches its 200 Day EMA.

In each of the two past swoons, the MACD has served as our all clear signal. Once it turned around and crossed, we were on our road to recovery.  If I were a betting man I would venture that this time won’t be any different.  

Hey Santa, how about a MACD crossover for the holidays.

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  • h. intengan m. d.

    i came across this site only accidentally last night. i was just flabergasted. the experience of mr. dawson was practically like mine. i did have that eerie de ja vu feeling when i read his introductory piece. i know quite well what it means to “start all over again”. i had also used macd among other things to help me understand the market to give me some chance of success. unfortunately i do not have any reason to bragg about anything yet inspite all those years and effort. it is not that i wish to, i am not that silly or stupid but i do wish i could have done better. we always want to push the envelope if we could, not necessarily for bragging rights however. going back to business, the macd matched against dow or spx(from askreasearch in my case because it is free) does correlate with the eventual recovery of the indexes after almost any “correction” including that after 3/2000 and also for the last 12 months. my problem with that however is that all of that is hindsight, quite interesting but still hindsight albeit recent. in other words i could use some help on this. it is true that in late march and late august of this year and hopefully very soon, the macd and other timing tools started to flip to the good direction in a way of speaking. however i am always plaqued by that problem of false starts because what we can only see at those points in time as now are the levels of being oversold which could still get oversold further in the next few weeks or months of trading even after such a promising pivot turn around. of course the markets did not do that after the macd flip positive in the past tracings but if your are waiting at the brink of the next trading days that is still not too helpful hindsight. that is my quandary and i hope you guys can help. i am so glad i found you. h. intengan

  • H, I am a trend trader. One of the most intregral aspects of my strategy is being on the right side of the trend. By definition I won’t be buying at the low or selling at the high. Those points anchor the trend and they are only known in hindsight anyway.

    My goal is to capture 60-80% of the move once it has been identified. The MACD is ideal since it is a trend following indicator – it confirms the begining and the ending of a trend.

    I also use trend lines which enables me to sometimes jump the gun on a MACD confirmation.

    Hope that helps….

  • h. intengan m. d.

    thank you for the reply but i have to take it a little bit further. in your work, what is it that gets you to leave some on the table after a good run or a good buy? h.

  • h, I use trend lines to help determine when to exit a position. Take a look at my article “Anatomy of a Stock Trade: Entry Techniques” that may help clarify things. I may have better examples posted, but that was the first one I came across.

  • h. intengan m. d.

    i might have jumped the gun a few trading days ago. so far so good but one never knows for sure, the market could always turn around and bite you like a snake. it is never over until the fat lady does her thing – having sold for a fat profit that is. there is always that possibility of having spoken too soon. it is still a great adventure but too expensive at times. good luck with your trading. H.