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MACD Never Confirmed S&P 500 Up Trend
By, Simon Maierhofer
Monday March 03, 2014
MACD is a lagging indicator, but that doesn’t mean it’s useless. A few weeks ago MACD warned that the rally is not yet sustainable. Here’s another look at MACD and what it says now.

The February 19 article “MACD Did Not Yet Confirm Stocks’ Up Trend" noted that weekly MACD did not confirm the S&P 500 up trend.

In particular, the article pointed out that: “MACD generally turned positive before the S&P 500 (SNP: ^GSPC) surpassed its prior highs. This isn’t the case this time around. Although the S&P 500 has come within four points of its prior high, MACD continues to lag.”

Below is an updated look at the S&P 500 and MACD.

After struggling to overcome 1,855, the S&P 500 (NYSEArca: SPY) finally broke out on Friday and spiked as high as 1,867.92.

But, MACD still never confirmed the up trend as the green line stayed below the purple moving average and the histogram persistently remained negative.

Partially based on MACD (combined with other technical analysis and Elliott Wave Theory), the February 23 Profit Radar Report (PRR) warned that: “Up side potential seems limited.”

The same PRR update quantified up side potential as follows: “A move above 1,851/1,855 would unlock a target around 1,870+/-.”

The 1,870+/- target was reached on Friday.

What’s next?

Down side risk is elevated whenever an up side target is reached. There are plenty of reasons to look for lower prices, but there’s one serious silver lining that suggests new all-time highs in the near future.

More details here: 5 Reasons Why 2014 Will Be a Tough Year and the One Reason it Won’t

Simon Maierhofer is the publisher of the Profit Radar ReportThe Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

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