The above chart shows monthly price action of the Top 40 index. Below the price chart is the MACD indicator. It is interesting to note that the MACD has crossed below its signal line. As such the MACD histogram has ticked negative. The last time the MACD histogram moved from a positive to a negative was beginning November 2014 (red vertical). After that, the market drifted sideways for over two years.
Whilst it did not enter a mark-down phase per se, opportunity costs may have been incurred by market investors. It’s also interesting to note that there is a long-term bearish divergence between the index and its MACD (green trendlines). Whilst these are not definitive signals that worse is to come, they certainly do seem to be sending a warning.
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