by Thomas Aspray
Last month I looked at how the MACD Momentum (MACD-Mo) and MACD Histogram (MACD-H)
were excellent intermediate indicators for stocks as well as commodities. I also use the MACD-Mo and
MACD-H on daily data, but the rules of interpretation and timing with the daily studies are somewhat
different. In this article I will concentrate on daily activity in many of the major markets to help you
utilize MACD studies in your own analysis.
To utilize the MACD studies on daily data, it is imperative that you study the intermediate trend as
determined by weekly indicators. Several indicators such as the Herrick Payoff Index, Demand Oscillator
and on-balance volume can be used effectively with the weekly MACD-Mo and MACD-H.
For trading purposes, combine both the weekly and the daily MACD-Mo and MACD-H to determine
how much weight the individual signals should be given. For example, when the weekly MACD-H and
MACD-Mo are both positive, short-term peaks in the MACD-Mo should be used as a signal to exit longs
and wait for new signals on the long side.
Conversely, if both the weekly indicators are negative, then short-term tops in the MACD-Mo should be
used to initiate short-term positions. If the weekly MACD-Mo is declining while the MACD-H is still
positive and rising, then more weight is given to the MACD-H.
On the daily charts, short-term positive signals by MACD-Mo should be confirmed in two to five days
using buy signals from MACD-H. Failure of MACD-H to confirm MACD-Mo is consistent with a
technical rebound, not the start of another leg to the upside. In addition, longer-term divergences (i.e., 4-8
weeks on the daily charts and 4-6 months on the weekly charts) on the MACD-Mo and MACD-H are