« Chart in Focus: Negative Divergence on MACD (3) »

S&P-500 negative divergence on MACDThe negative divergence on the charts of the Dow Industrials 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, Aug 25th.

The potential sell signal completed itself when MACD moved below the intervening trough, last Tuesday, but there hasn't been much followthrough to the downside thereafter. In fact, the markets are virtually back at the highs that were put in place in the week prior to last.

Technicians who follow MACD will be a little wary of the action, however, because the negative divergence is still alive, despite the rebound. If you look at MACD, you'll notice that although the indicator has flattened over the past few sessions, it is still at or just below the level of the intervening trough (on MACD).

A negative divergence is seen as having been nullified, once the indicator has moved back above the most recent peak in the indicator (the level it was at around Aug 28th or so). The markets will have to rally a few more percentage points before that happens.

This chart will continue to be the 'chart in focus,' until the negative divergence is nullified or something major happens elsewhere on the charts.