Adam Hewison released an educational video this morning entitled “How to Trade Divergences in the S&P 500“.

Like me, Adam is using the MACD (standard settings) to highlight non-confirmations between price and the indicator.  Divergences occur when a market makes a new swing high but the MACD indicator (or other oscillator) does not make a higher high.

Image links to free video page.

Adam defines divergences, and shows a few recent examples, including a failed divergence.  He then moves the chart in closer to look at the current MACD/Momentum divergence (as I’ve been describing) in the S&P 500 recent highs which – under classic assumptions – would be a non-confirmation forecasting a pullback/reversal.

I explain these concepts and you know I’m a big fan of divergences (though I use faster settings “3, 10, 16″ in my MACD), but sometimes it can be helpful to see the concept presented from a different perspective or with a video, and I’ve always thought Adam does a good job with his quick commentaries.

Thanks again to Adam for the video update!

Corey Rosenbloom, CMT