- Rank: 70
- Followers: 6
- Votes: 1
- Years Member: 14
- Last Update: 15 January 2019, 15:33
I have marked the monthly MACD buy and sell signals on the S&P 500 index chart using green (for buys) and red (for sales) vertical dotted lines. For trading purposes investors should use the etf equivalent symbol SPY. I've backtested this for the past 25 years and it has kept an investor on the right side of the markets, insofar as the S&P 500 index is concerned. There are not a lot of signals but for long-term accounts like 401K's , burned in the big downturns , this is perhaps a good timing tool to follow. I don't personally believe you should hold index funds when the MACD is on a monthly sell signal. As for individual stocks you will find that few will benefit you when the market is on a monthly MACD sell. Until the monthly MACD returns to a buy signal you should certainly put stops on any individual securities owned, in my opinion, to avoid losing hard to come by gains.
I created the chart after the Sept. plunge in the markets got underway because some of my friends asked me how low the markets could go. The initial plunge halted itself at the upper trend line which connected the March 2009 low to the first major low in the recovery. Now, Jan 7th, we have a pretty stout rally underway, that I think will encounter resistance around 2600, an area I've note with a Blue arrow. My guess is that once that resistance is met, we will begin a retest of the earlier lows. But that's just my working hypothesis at the moment....every market opinion has to be flexible.
My current hypothesis (January 7) is that we could be in a cyclical bear market similar to the one that we had in 2015/2016. That cyclical bear ended in February 2016 after the indices and NYSE 200 day moving average breadth indicator bounced off double bottom patterns. I've inserted the 2016 bottom pattern and the current chart with the same indicators into the list so that we can watch and look for similarities. As Yogi said, you can leanr a lot by looking...so we will~
The bottoming of the 200 day moving average and its reversal surge clued me into the end of the 2015/2016 cyclical bear. Using this look back chart to compare to the current situation.
Trend lines can help spot important inflection points. Everyone has been looking at 2600 as potential resistance. The blue trend line connecting lows suggests that the rally could go to 2675 before petering out. I'm not convinced one way or another and am sitting in cash in my personal portfolio. Before I turn bullish, I'd like to see some movement in the % of stocks trading above their 200 day moving average. Below 30%, at this point is hardly encouraging to me. A chart on Bloomberg TV this morning (1/15) showed the downward earnings revisions are the sharpest since 2009. An old saying I like is...more will be revealed later. We will continue to watch and adjust.
This is a commonly used Vanguard ETF that mimics that entire market. It provides greater diversification than the SPY that mimics the S&P 500. Accordingly, I prefer it. It has only existed 20 or so years, so its chart is not as long as the SPX presented above. Similarly I've marked the MACD buy and sells with green and red vertical dotted lines.....
I've marked the monthly MACD buy and sell signals here for the Nasdaq 100. Traders should use the etf QQQ, which mimics the NDX 100 for trading purposes. This etf has a heavy weighting (39.9%) in the FAANG stocks. Facebook, Apple, Amazon, Netflix and Google.
This information is presented for education purposes only. StockCharts.com is not responsible for any comments, advice, or annotations presented on this page. Please review our Terms of Service for more details.