![]() ![]() In addition to bearish and bullish divergences, the MACD might confirm price movement as well. This bearish divergence warned of the impending downturn of the S&P 500 future and the market as a whole. Nevertheless, the MACD technical indicator made a clear lower low from Low #1 to Low #2. In yet another bearish sign for the E-mini S&P 500 futures contract, the future made higher lows from Low #1 to Low #2, which again is usually considered positive. This bearish divergence acted as an early warning sign of things to come with the E-mini S&P 500 futures contract. However, the MACD moving average failed to make a new high. Looking at the E-mini S&P 500 future, from High #1 to High #2, the futures contract made higher highs, which is usually viewed as bullish. This chart of the E-mini S&P 500 Index Future shows bearish and bullish divergences. Bullish divergence occurs when the indicator is indicating that price should be bottoming and heading higher, yet the actual price action is continuing downward.Bearish divergence occurs when a technical analysis indicator is suggesting that a price should be going down but the price of the stock, future, or currency pair is continuing to maintain its current uptrend.What Are MACD Divergences?ĭivergences might signal a trader to get out of a long or short position before profits erode. In addition to signaling, potential buy or sell signals, the moving average convergence divergence could be used for warnings of potential change in the direction of stocks, futures, and currency pairs. A trader might wait until the MACD histogram went to zero, but that would be the same signal as the MACD moving average crossover. Note: In the above example, three consecutive days of the shrinking MACD histogram from top or bottom served as possible buy or sell signals, these are shown with arrows. When the MACD histogram is above the zero line and begins to converge towards the zero line. Potential Sell Signals With MACD Histograms When the MACD histogram is below the zero line and begins to converge towards the zero line. Potential Buy Signal With MACD Histograms Notice in this example how closely the tops and bottoms of the MACD histogram are to the tops of the Nasdaq 100 e-mini future price action. In contrast, the letter “B” shows when the bottom of the MACD histogram occurs. ![]() The letter “T” represents when the top or peak of the moving average convergence divergence histogram occurs. ![]()
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