By Steven Hicks — 24 Aug 2026

MACD: Reading the Relationship Between Trend and Momentum

A market can be trending higher while simultaneously beginning to lose momentum.

That sounds contradictory, but it isn’t.

Imagine a car climbing a hill. It is still moving upward, but its speed drops from 60 miles per hour to 50, then 40, then 30.

The direction hasn’t changed.

The momentum has.

Financial markets can behave the same way.

Gold may continue making new highs while the strength of each advance gradually diminishes. Crude oil may remain in a downtrend while the intensity of the decline begins to weaken.

Recognizing that distinction between direction and momentum is one of the central challenges of technical analysis.

And one of the most popular tools for examining it is today’s technical indicator:

MACD.

Technical Indicator of the Day: MACD

MACD stands for:

Moving Average Convergence Divergence

It was developed by technical analyst Gerald Appel in the late 1970s.

Despite its complicated-sounding name, MACD is built from something we’ve already discussed:

moving averages.

More specifically, MACD examines the relationship between two Exponential Moving Averages, or EMAs.

The commonly used settings are:

12-period EMA

and

26-period EMA

The basic MACD line is calculated by subtracting the longer average from the shorter one:

MACD = 12-period EMA − 26-period EMA

That gives us the MACD line.

Then another moving average—traditionally a 9-period EMA of the MACD line—is calculated.

That becomes the:

Signal line.

Finally, many charting platforms display the difference between the MACD line and signal line as vertical bars.

That’s called the:

MACD histogram.

So although a MACD chart may initially look complicated, we’re really dealing with three related components:

MACD line
Signal line
Histogram

Let’s examine what each one tells us.

Why Compare Two Moving Averages?

Remember that shorter moving averages respond more quickly to recent price changes than longer moving averages.

If prices begin rising rapidly, the 12-period EMA generally responds faster than the 26-period EMA.

The distance between them increases.

MACD therefore rises.

If the market’s upward momentum begins weakening, those two averages may start moving closer together.

MACD begins falling.

This is where the words in its name come from:

Convergence — the averages are moving closer together.

Divergence — the averages are moving farther apart.

MACD is therefore measuring something very useful:

How the shorter-term trend is behaving relative to the longer-term trend.

The Zero Line

Because MACD subtracts one moving average from another, it has a natural reference point:

Zero.

When MACD is above zero:

The shorter-term EMA is above the longer-term EMA.

When MACD is below zero:

The shorter-term EMA is below the longer-term EMA.

This gives analysts a quick way to evaluate the relationship between shorter- and longer-term price behavior.

But once again:

Above zero does not automatically mean buy.

Below zero does not automatically mean sell.

The indicator is describing market behavior—not issuing instructions.

The Signal-Line Crossover

One of the best-known MACD observations occurs when the MACD line crosses its signal line.

Suppose MACD has been declining.

Then it begins rising and crosses above the signal line.

That indicates that shorter-term momentum has strengthened relative to its recent MACD average.

Conversely, if MACD crosses below its signal line, shorter-term momentum has weakened.

These crossovers can be useful.

But they can also occur frequently—particularly when markets are moving sideways.

That’s why a crossover becomes more meaningful when considered alongside the broader market structure.

Understanding the Histogram

The MACD histogram provides a visual representation of the distance between the MACD line and the signal line.

When the two lines move farther apart, the histogram bars become larger.

When they move closer together, the bars shrink.

This makes the histogram particularly useful for observing changes in momentum.

Suppose crude oil has been advancing strongly.

The histogram looks like this conceptually:

Small bar
Larger bar
Larger bar
Very large bar

Momentum is expanding.

Then:

Large bar
Medium bar
Small bar

Price might still be rising.

But the histogram is shrinking.

That tells us something important:

Upward momentum is decelerating.

It doesn’t tell us that crude oil is about to fall.

But it tells us the character of the advance is changing.

Momentum Can Change Before Price Direction Changes

This is one of the most valuable concepts MACD can teach.

Price doesn’t have to reverse before momentum begins weakening.

Imagine gold moves:

$3,300
$3,340
$3,365
$3,380
$3,386

Gold is still rising every step of the way.

But look at the size of the increases:

+$40
+$25
+$15
+$6

The direction remains upward.

The rate of advance is slowing dramatically.

A momentum indicator may begin detecting that deterioration before the price chart shows an obvious reversal.

That doesn’t mean a reversal must follow.

The market might simply pause and then accelerate again.

But the information is useful.

MACD Divergence

Like RSI and OBV, MACD can also display divergence from price.

Suppose copper makes a new price high.

MACD also reaches a strong high.

Later, copper pushes to an even higher price.

But MACD forms a lower high.

Price is stronger.

Momentum is weaker.

That’s called bearish divergence.

The opposite can occur during declines.

Price reaches a new low while MACD forms a higher low.

That’s commonly called bullish divergence.

Divergence doesn’t guarantee that the trend will reverse.

But it alerts the analyst to a disagreement between:

what price is doing

and

how strongly it is doing it.

That disagreement deserves attention.

MACD Works Better in Some Markets Than Others

MACD is fundamentally a trend-following momentum indicator.

That means it tends to become more informative when markets develop sustained directional movement.

Suppose crude oil begins a strong multiweek trend.

The shorter and longer EMAs separate.

MACD can help illustrate the strength and evolution of that movement.

But now imagine crude oil spends three weeks moving sideways inside a narrow range.

The moving averages repeatedly cross.

MACD crosses its signal line.

Then crosses back.

Then crosses again.

These repeated signals can become whipsaws.

The problem isn’t necessarily MACD.

The problem is that we’re using a trend-oriented tool in a market that isn’t trending.

Before interpreting any indicator, ask:

What type of market environment am I analyzing?

MACD Versus RSI

We’ve now studied two popular momentum indicators:

RSI and MACD.

They aren’t identical.

RSI measures the relative magnitude of recent gains and losses and confines the result between 0 and 100.

MACD measures the relationship between two exponential moving averages and has no fixed upper or lower boundary.

RSI can be particularly useful for examining momentum extremes and overbought/oversold conditions.

MACD can be particularly useful for examining changes in trend and momentum relationships.

Sometimes they agree.

Sometimes they don’t.

And when they disagree, that itself may prompt further investigation.

Building Confluence

Let’s combine several tools from our recent MarketsTriad lessons.

Imagine gold has been advancing for several weeks.

We observe:

higher highs and higher lows,
price above a rising 50-day moving average,
expanding volume during advances,
RSI maintaining strong momentum,
MACD above zero and above its signal line, and
previous resistance becoming support.

Those independent observations broadly agree.

Now imagine something begins changing:

gold reaches another new high,
volume declines,
RSI forms a lower high,
MACD histogram begins shrinking, and
price struggles to advance beyond resistance.

Nothing in that list proves gold will reverse.

But the evidence has clearly changed.

That is precisely what technical analysis should help us recognize.

Not certainty.

Changing probabilities and changing market conditions.

Avoid the Indicator Christmas Tree

It’s tempting to keep adding indicators.

MACD.

RSI.

Stochastic.

Bollinger Bands.

Moving averages.

Volume.

ATR.

OBV.

Eventually, the chart begins looking like a Christmas tree.

More indicators don’t automatically produce better analysis.

In fact, several indicators may simply be measuring variations of the same underlying information.

A better approach is to understand what question each indicator answers.

For MACD, the question is approximately:

How is shorter-term trend momentum behaving relative to the longer-term trend?

That’s useful information.

We don’t need MACD to answer every other question as well.

MarketsTriad Takeaway

MACD helps reveal something that isn’t always obvious from price alone:

A market’s direction and its momentum are not the same thing.

Price can continue rising while momentum weakens.

Price can continue falling while downward momentum diminishes.

And momentum can strengthen before a trend becomes visually obvious.

So the next time you’re examining a commodity chart, don’t ask only:

“Which direction is this market moving?”

Add a second question:

“Is that movement gaining strength or losing strength?”

That distinction can transform the way you interpret a trend.

And it reinforces one of the central principles of the MarketsTriad Training Academy:

Don’t ask an indicator to predict the future. Ask it to tell you something useful about the market you’re observing right now.

MarketsTriad provides market information and educational analysis. This material is for educational and informational purposes only and is not individualized investment, trading, legal, or financial advice. Futures and commodities involve substantial risk, and past market behavior does not guarantee future results