Sy Harding's MACD Seasonal Buy Signal

Yesterday the MACD for the S&P500 turned positive for a Sy Harding Buy Signal. (See Sy Harding: Seasonal Timing Strategy.) The MACD is the "special sauce" that Sy Harding applies to his variation of the "Seasons in the Sun Strategy" which he calls his "Seasonal Timing Strategy" or STS for short.

STS worked great this year getting out of the market in the Spring around 1400 and getting back in now at about 939, 33% lower! If the market recovers to 1400, Harding's STS will have made an incredible 49% more than buy and hold!

Click chart courtesy of stockcharts.com to see full size image

Sy waits for the MACD to turn positive after October 16, the average best day to enter the stock market based on the "Seasons in the Sun Strategy." Harding writes:

The idea is that if a rally is underway when the October 16 calendar date for seasonal entry arrives, as indicated by the MACD indicator, we will enter at that time. However, if the MACD indicator is on a sell signal when the October 16 calendar date arrives, indicating a market decline is underway, it would not make sense to enter before that decline ends, even though the best average calendar entry date has arrived. Instead, our Seasonal Timing Strategy simply waits to enter until MACD gives its next buy signal, indicating that the decline has ended.

Sy will use the same indicator to look for the favorable exit point from the market when the MACD gives a sell signal any time after April 20.

For more, see

• Sy Harding: Seasonal Timing Strategy (STS)
  
  
• Sy Harding's S&P500 MACD Charts

Sy Harding is president of Asset Management Research Corp., DeLand, FL, publisher of The Street Smart Report. This article is my "interpretation" of public information posted by Sy Harding. Harding may have changed his formulas and not written about it while keeping the old info on his web site which you would only know for sure by subscribing to his service.

Other key sentiment indicators for stock market technical analysis include:

• AAII: American Association of Individual Investors Bull/Bear Index: AAII Charts and Info
• II-BBS: Investors’ Intelligence Bull Bear survey: II Charts and Info
• ISE (International Securities Exchange) Sentiment Index: ISE Charts and Info
• State Street Investor Confidence Index State Street Charts and Info

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11/01/08 Update: A reader told me via email that Sy Harding uses weekly MACD signals (not daily) according to some "experts" posting on discussion forums. This is not true if you believe Sy Harding's own web site which says:

What is the formula for MACD?

MACD as we use it is plotted as follows: Using the daily closing prices of the index or security you want to plot MACD on, subtract the value of a 26 day exponential moving average of the closes, from a 12 day exponential moving average of the closes. That produces the solid indicator line. Then plot a 9 day exponential m.a. of the indicator line, and display it on top of the solid indicator line as a dotted or different color line, so you can tell the two apart. The dotted line is known as the signal line. When the solid line crosses the dotted line to the downside it produces a sell signal. When the solid line crosses the dotted line to the upside it produces a buy signal.

If you use weekly data rather than daily data, or assuming you're doing this via computer, simply compress the daily data by a factor of 5, you will change the short term MACD indicator to an intermediate term MACD indicator. Only the short term version is usable with the Seasonal Timing System.

I back tested my formulas (I have an account at Stockcharts.com) with the charts Sy Harding shows for his STS for 1997 and 1998. The signals my formulas generated match Harding's published buy and sell points exactly.

You can watch the weekly MACD here for free.

Bottom line: Beware what you read on discussion forums. If people can't present the math or formulas to back what they are saying, then proceed with extreme caution!

See Sy Harding: Seasonal Timing Strategy for more information.
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