« Chart in Focus: Negative Divergence on MACD (2) »

The potential negative divergence that has developed on the charts of the Dow Industrial and the S&P-500 (chart shown on right), in addition to a few other broad market indices, has been the "Chart in Focus," since Tuesday.

There hasn't been much of a change in the picture since then because the markets have virtually flat-lined, at least on a closing basis, over the past week.

There will need to be a clean break to new highs (at least 2-3% higher) for the failure swing to be nullified and, therefore, for the negative divergence to be seen as null and void.

On the other hand, if prices start to drop, it will take a completion of a failure swing (breaking of the thin line extended from the level of the intervening trough on MACD) to signal that the negative divergence is in effect in full force.

So, we'll be watching closely to see which of the two scenarios materializes.