A short article to test the appeal of the MACD indicator, one of the most popular market indicators, from a tactical equity allocation approach.
I show that an MACD strategy not only underperforms significantly, but also that doing the opposite of this indicator (Inverse MACD) yields much better results.
The test object is the S&P 500 Index and the test is on two different time frames: Daily returns and weekly returns.
A further test is done by varying the MACD EMA length to see if there are non-random/non-overfitted settings to be exploited.
Introduction to the MACD and the Data
The MACD, the Moving-Average Convergence Divergence indicator, has been around for more than 45 years. It is a collection of three time series usually calculated from the closing