![elliott wave tool in our mtpredictor elliott wave tool in our mtpredictor](https://i.ytimg.com/vi/6TNAdYmmuTk/maxresdefault.jpg)
This is one of the reasons we use multiple timeframes, each showing the MACD indicator. For instance, you can wait a long time for MACD divergence to develop on a weekly or monthly chart, but the size of the coming trend charge (upon fully formed divergence) is likely to be substantial.Ĭareful monitoring of the MACD indicator on multiple chart timeframes can provide important clues as to future market direction because multiple divergences at smaller timeframes generally lead to a larger, more powerful divergence at larger timeframes. Also, the longer the timeframe of chart, the more powerful the potential trend change due to the divergence. Divergence between price and the indicator can indicate an imminent trend change. “Divergence” is when price is making a new extreme, but a momentum indicator (like MACD) is not. The MACD indicator is one of the most valuable standard indicators available on all trading platforms. However, it certainly is handy to be aware of extreme sentiment positioning when all of our other methodologies agree that a change of direction is imminent. Periods exhibiting extreme sentiment positioning can last for a weeks though, so trading solely on sentiment can be difficult from a timing perspective. This extreme spread between the positioning of retail traders and large commericals is something we constantly look for, as it provides an optimum condition for trend change. The subsequent post-crash rally is then fueled by short covering, which is retail traders buying to exit short positions. Bear market crashes nearly always end with retail traders heavily short, and large commercial traders heavily long. The opposite generally holds true at major market bottoms. This is because retail traders are generally trend followers, and large commercial traders tend to “fade” mature trends. For instance, at most major market tops, the great majority of retail traders are “all in” long, and the great majority of large commercial traders are heavily short. Occasionally, market sentiment reaches meaningful extremes.