SDS: The MACD Slap Shot

From August 26, on the SDS:

"At yesterday's new low in the SDS, the MACD pulled back to the signal line, and it's diverging positively with price. The MACD is at -1.889. The signal line is at -1.924, so it's poised for a "slap shot" to the upside, like a puck sliding into the hockey stick, and then....WHACK...slap shot to the upside."

The MACD ticked higher at Friday's close, from ju-u-u-ust above the signal line. That was a positive divergence, and a non-confirmation of the new low at 42.09, setting up the chance at a slap shot.




On Monday morning, the SDS came off the signal with a Gap Up, and left 42.92 to 43.58 unfilled on the chart. Those gaps often get called back, as this one did. On yesterday morning's rally in the SPX, the SDS went back and filled nearly all of the gap, putting in a low of 43.01, and then ripped it to the upside. Slap shot! The Bears scored their first close above the 21-day Kijun-sen (solid red line) since the July 8 top. Quite nice.

When a chart is bearish, as this one is, these MACD signals (and, signals from other indicators) can turn out to be "One-to-Three Day Wonders," like we had on August 17 when the SPX broke down below the Descending Triangle, then quickly reversed to the upside, so we need to keep that in mind. On August 17, the SDS gapped up and made a run for the 21-Day Kijun-Sen (solid red line), fizzled, then had another leg down. Yeesh. Review the August 26 post, "SDS - Broken Indicators...Broken Systems" for some other examples.

Still, The Bears capitalized on the bullish MACD signal and put in a good day, so they are to be commended. They've got a chance at something here. If I were coaching The SDS Bears, my game plan would be to go up there to the 47.74 horizontal resistance area to establish a neckline or a flat top for an Ascending Triangle, pull back for a Right Shoulder or an ascending line, giving the 8-day Tenkan-sen and 21-day Kijun-sen an opportunity to make a Bullish Cross, then go back up and knock out 47.74, head for Kumo (Cloud) resistance, and start banging away at it. Biting a few Bulls in the ankle would be alright, as long as no referee is looking. Bears can't afford any more penalties after Monday's Gap Up got called back for roughing The Bulls ;)