Saturday, March 2, 2013

Basic technical analysis:

Our weekly plot of the NASDAQ Composite is accompanied by two studies, a weekly MACD and a spread vs. the S&P500 smoothed by a 20 period simple moving average.

There are four distinct patterns here

(A) Note the series of lower highs of the MACD as set out in the upper plot.

(B) Note the series of higher highs of the NASDAQ Composite center plot

(C) Note the rising wedge as contained between the two rising and pinching trend lines

(D) Note the declining spread slipping under the 20 period smoothing illustrating poor performance relative to the S&P500.

In summary we have negative divergence between (A) and (B) in other words a series of higher highs on the index and a series of lower highs on the MACD. Also the rising wedge at (C) is bearish and finally the declining performance relative to the S&P500 is a negative for this important index. Don’t shoot the messenger.


yogi said...

Hi Bill,

Nice charts!,...I was wondering what would happen if we applied equal weighting to the index. I was only able to apply this study to the Nasdaq 100 equal weighted. Interestingly, the divergence is still present but it is not so pronounced and subject to interpretation. In terms of the relative strength, there are signs of reversal out performance. Wish I could upload a chart for ya but don't know how :-),...I think if we pushed AAPl out completely, we may be able to extend this bull a little further :-) what do you think?

dh12 said...

What are your views on the DJT looks to have broken an inverse head and shoulders on the weekly starting in 07/13/07. If it plays out could be massive upside from here