upordown – Also keep in mind that in analyzing the broad markets, I find it important to look at all of the major diversified indexes to get a feel for stock market as a whole. E.g.- If only one of two indices breakdown below support & the others are still holding above, I will usually hold off on shorting. In this case, if the NDX takes out the divergence on the MACD but the SPX & others are still making divergent highs, that doesn’t eliminate the case for a likely trend reversal although it certainly doesn’t help as it would have been better to see very pronounced divergent highs on all indexes to make a strong case for a swing short trade. One last thing to add is that from my experience, the biggest drops in the market often come after the point the charts indicated it would, sometimes by weeks or even months. Maybe that is a factor of too many shorts seeing the same clearly bearish techincals & shorting too much at the same time (followed by a continued move higher while most of those shorts are squeezed out, thereby clearing the way for a sustained correction).

ok thanks. that is what i was wondering.. just to clarify.. as long as current momentum is lower than initial momentum cross then the divergence is still valid to trade?

just an observation.. if the last bullish swing was the stairs up.. then the escalator down will be a wild ride..

TXU- We’ll have to see how we close the day but as of now, the NDX has just slightly taken out those previous highs on the daily time frame indicators on both the MACD & RSI. 60-minute divergences on all US indices still well intact for now.

Randy,

I’m looking at chart for QQQ on Daily Basis. The Wilder RSI is now at 70.12. Does this eliminate the divergence? I believe previous high that we were looking at was 70.33 on April 1st.

Really reels like this has been a correction by time and that the market is preparing for another leg up.

Thanks and good luck to all.

That’s a good point & I would have to say that on balance, that is “less bearish” than if this 3rd consecutive peak in the MACD was below the previous peak as it shows an increase in momentum. So we should probably place that one in the “bullish” column for now.

In the bearish column, I would point out the previous series of consecutive divergences on that chart from late 2014 to mid- 2015. The second divergent high was higher that the first divergent high & still resulted in a decent correction. i.e. the divergence played out as expected. Also, if we simply ignore the second divergent high in both periods, then the bigger and much more significant development, IMO, is the large divergent high from the initial reaction high on the MACD (and RSI) to the most recent lower high (still pending but close) on both the MACD & RSI. It doesn’t matter that there are 2 or 3 trendlines of various slopes on prices above as negative divergence is simply the fact that the momentum indicators & price oscillators have (or might) made a lower high against prices making higher highs.