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The MAC-D indicator was invented by Gerald Appel, and it stands for Moving Average Convergence-Divergence. It consists of three exponential moving averages (EMA) of price and can be calculated for any time frame, such as daily, weekly, or monthly. To construct the weekly MAC-D we would calculate a 12-week EMA and 26-week EMA of weekly closing prices, and then subtract the 26-week EMA from the 12-week EMA which results in the fast MAC-D line. Next calculate a 9-week EMA of the fast MAC-D line, which results in the slow Signal line. The standard MAC-D indicator is the result of plotting the fast and slow lines, and BUY/SELL signals result when the fast line crosses the slow line.

You can use the weekly MAC-D histogram as an aid in making decisions for intermediate-term market direction. To obtain the MAC-D histogram, subtract the Signal line from the MAC-D line and display the result as an histogram. When a top forms on the histogram (the most recent column is shorter than the prior one), a SELL Signal results, and a BUY Signal is given when the histogram form a bottom.

The MAC-D is a price trend following indicator and by tracking the weekly MAC-D we can get an idea when the intermediate-term trend may be getting ready to change.

-- Carl Swenlin