1.  First, we will discuss MACD Divergence signals today.

2. Then, we will question whether the Institutional Index, the NYA (NYSE Index), the DOW, the S&P 500, the NASDAQ 100, or the Russell 2000 has any kind of MACD Divergence signal.

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1. MACD Divergence Signals.
There are 3 types of Bullish signals that can come from the MACD Indicator.  The three types are:
a. Positive Divergences
b. Bullish Moving Average Crossovers
c. Bullish Centerline Crossovers, and ...

There are 3 types of Bearish signals that can come from the MACD Indicator.  The three types are:
a. Negative Divergences
b. Bearish Moving Average Crossovers
c. Bearish Centerline Crossovers

Today, we will specifically discuss the MACD Negative Divergence.

So, what are MACD Divergences?

A Positive MACD Divergence is a condition that occurs when the underlying security moves down or sideways and the MACD does the opposite by rising or making a higher/low.  Of the three kinds of MACD Bullish signals, the Positive Divergence signal is the least common but typically the most reliable signal.  Bullish MACD Divergences are regarded as an important "bullish" sign by technical analysts.

Conversely, a Negative MACD Divergence is a condition that occurs when the underlying security moves up or sideways and the MACD does the opposite by declining or making a lower/high.  Of the three kinds of MACD Bearish signals, the Negative Divergence signal is the least common but typically the most reliable signal.  Bearish MACD Divergences are regarded as an important "warning" sign by technical analysts. 

______________________     Part 2   ______________________

Given that we now have definitions of MACD Divergences, let's question whether the Institutional Index, the NYA (NYSE Index), the DOW, the S&P 500, the NASDAQ 100, or the Russell 2000 have a Negative MACD Divergence.

The first chart we will discuss is the the NASDAQ 100.   Its chart form September 2008 to June 2009 is below with its MACD chart.

Let's look at this chart from left to right.  Moving from September 2008 to February 2009, you can see that there are two upward sloping lines on the MACD indicator.   If you look at the trend line direction for each of those relative to the NASDAQ 100's price movement, you can see that the MACD was Positively Divergent by definition.

After the first Positive Divergence, the NASDAQ's price stopped falling and rose higher.

After the second Positive Divergence, the NASDAQ's price rose higher again giving birth to the current rally that started in March.

Okay ... that's good, but where are we now?

Well, if you look at the MACD chart again, you can see that it recently made a lower top, so its resistance line is falling.   In such a case, we know that we want to check the direction of the NASDAQ's price.  If it is moving in the opposite direction or flat, then that would be the definition of a Negative MACD Divergence.

A quick look at the NASDAQ does show the price made a higher/high, while the MACD made a lower/high.  By definition, that is a Negative MACD Divergence signal and a "warning" sign that the rally could be facing a reversal to the downside in the coming days.

What about the other indexes ... the NYA (NYSE Index), the DOW, the S&P 500, and the Russell 2000?

I checked all four of those charts and guess what?   They are all showing the same Negative MACD Divergence pattern.   Something else worth noting: According to our MACD analysis right now, the DOW is a weaker index than the NYA, S&P 500 and the Russell 2000 (the NASDAQ 100 is the strongest).  So, this weakness may take a little time to show itself, but for now, she's waving the red warning flag.

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