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Chapter 8. Advanced Moving Average Conve... > The Amazing Ability of the MACD to I...

The Amazing Ability of the MACD to Identify Significant Market Low Points Following Severe Stock Market Declines

The MACD would be worth following even if only one of its capabilities existed: its ability to define market re-entry junctures following serious intermediate- and long-term market declines. We have already seen this ability as it relates to longer-term market trends in the ability of monthly-based MACD charts to identify major bear market lows. Chart 8.19 illustrates the ability of the MACD to identify with considerable reliability the conclusions of intermediate stock market declines. I, myself, know of no indicator that surpasses the MACD in this regard.

Chart 8.19. New York Stock Exchange Index: The February–March 1980 Stock Market Decline

After producing a sell signal only three days after the significant market high in February 1980, the MACD remained out of the stock market throughout the decline, re-entering only three days after the final lows had been established as March came to a close.



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