Is the first red column of the monthly MACD a long-term start or a technical rebound?

The first red MACD column on a monthly chart may signal weakening momentum, but confirming a long-term downtrend requires analysis of volume, on-chain data, and broader market context.

Jul 24, 2025 at 03:14 pm

Understanding the Monthly MACD and Its Significance

The Monthly MACD (Moving Average Convergence Divergence) is a momentum indicator used to identify long-term trends in cryptocurrency price movements. It calculates the difference between a long-term exponential moving average (EMA) and a shorter-term EMA, typically the 26-period and 12-period EMAs. The resulting line, known as the MACD line, is then compared to a signal line (usually a 9-period EMA of the MACD line), and the difference between the two is plotted as a histogram. When the histogram turns red, it indicates that the MACD line has crossed below the signal line, signaling bearish momentum.

In the context of monthly charts, a red column carries more weight than on shorter timeframes due to the extended period each data point represents. A first red column after a prolonged green phase may suggest a shift in market sentiment. However, determining whether this shift marks the beginning of a long-term downtrend or merely a temporary technical correction requires deeper analysis of volume, price structure, and broader market indicators.

Key Characteristics of the First Red Column on Monthly MACD

When the MACD histogram on the monthly chart transitions from green to red for the first time after a bullish phase, several factors must be evaluated:

• The magnitude of the red bar compared to previous green bars. A small red column may indicate weakening momentum but not necessarily a reversal.
• The position of the price relative to key moving averages, such as the 200-month EMA, which often acts as long-term support or resistance.
• Whether the MACD lines (MACD and signal) have crossed below zero, which would confirm bearish momentum across the entire indicator, not just in the histogram.
• Volume trends during the formation of the red column. Declining volume during the red bar could suggest lack of conviction among sellers.

A first red column with low volume and shallow histogram depth may reflect profit-taking rather than a structural bear market. In contrast, a deep red column accompanied by high volume and a breakdown below critical support levels increases the likelihood of a sustained downtrend.

Differentiating Between Long-Term Downtrend and Technical Rebound

To assess whether the first red column signals the start of a long-term bearish phase or a short-term pullback, traders should examine multiple layers of technical evidence.

• Analyze the higher time frame structure, such as the 4-year or 2-year cycle common in Bitcoin and major altcoins. If the market is near the peak of a known cycle, a red MACD column may align with a macro top.
• Evaluate on-chain metrics like Network Value to Transactions (NVT) ratio or MVRV (Market Value to Realized Value). Elevated values preceding the red column suggest overvaluation, supporting a long-term reversal.
• Check for divergences between price and MACD. If price makes a new high while the MACD fails to surpass its prior peak, this bearish divergence strengthens the case for a structural top.

If the red column appears after a parabolic rise and coincides with extreme sentiment readings (e.g., fear & greed index in "extreme greed"), it is more likely the beginning of a long-term correction. Conversely, if the price remains above key moving averages and the correction occurs amid healthy sentiment, the red column may reflect a technical rebound within a larger uptrend.

How to Use the Monthly MACD in Conjunction with Other Indicators

Relying solely on the MACD can lead to misinterpretation. Combining it with complementary tools enhances accuracy.

• Use the Monthly RSI (Relative Strength Index) to confirm overbought or oversold conditions. An RSI above 70 when the MACD turns red supports a reversal scenario.
• Monitor on-chain supply distribution. A spike in exchange inflows at the time of the red column may indicate distribution by large holders (whales), reinforcing bearish implications.
• Apply Ichimoku Cloud analysis on the monthly chart. If price exits the cloud and the cloud turns red (tenkan-sen below kijun-sen), the bearish signal is reinforced.

Additionally, consider macroeconomic factors such as Federal Reserve policy cycles or regulatory developments in major markets. Cryptocurrencies often react to liquidity conditions, and a tightening monetary environment can amplify the significance of a monthly MACD red column.

Step-by-Step Guide to Analyzing the First Red MACD Column

To conduct a thorough assessment of the first red column on the monthly MACD:

• Open the monthly chart of the cryptocurrency (e.g., Bitcoin or Ethereum) on a platform like TradingView.
• Apply the MACD indicator with default settings (12, 26, 9) and ensure the histogram is visible.
• Identify the most recent green-to-red transition in the histogram and note the exact month it occurred.
• Overlay the 200-month EMA and observe whether price is above or below it at the time of the red column.
• Check trading volume for that month using the volume oscillator or on-chain data sources like Glassnode.
• Compare price action to historical cycles—use logarithmic scaling to identify recurring patterns.
• Review on-chain metrics such as SOPR (Spent Output Profit Ratio) and MVRV Z-Score for confirmation.
• Cross-verify with sentiment indicators like the Crypto Fear & Greed Index for that month.

This systematic approach helps distinguish between noise and meaningful structural shifts.

Common Misinterpretations of the Monthly MACD Signal

Many traders misread the first red column due to cognitive biases or incomplete analysis.

• Assuming every red column is a sell signal ignores the context of the broader trend. In a strong bull market, temporary red columns may be followed by renewed upside.
• Overlooking lagging nature of MACD—it is based on moving averages and reacts after price moves, not before.
• Failing to account for halving cycles in Bitcoin, where post-halving consolidations often produce red MACD columns before resuming upward momentum.

Understanding these pitfalls prevents premature conclusions and supports more disciplined decision-making.

Frequently Asked Questions

Can the monthly MACD give false signals?
Yes. The MACD is a lagging indicator and may turn red after a significant portion of the price drop has already occurred. It can also generate false signals during sideways markets or when volatility is low. Combining it with leading indicators improves reliability.

Does a red MACD column always mean I should sell?

No. A red column alone is not a sufficient reason to sell. It must be evaluated alongside price structure, volume, on-chain data, and market context. In strong bull markets, brief red columns may present buying opportunities.

How long should I wait before confirming the trend after the first red column?

There is no fixed timeframe. Monitor the next 1–3 months for follow-through. If subsequent monthly bars deepen in red and price breaks key supports, the bearish case strengthens. If the histogram turns green again and price recovers, the initial red column may have been a correction.

Is the monthly MACD more reliable for Bitcoin than altcoins?

Generally, yes. Bitcoin has more predictable cycles and higher liquidity, making technical indicators like MACD more consistent. Altcoins often exhibit erratic behavior due to lower liquidity and speculative trading, reducing the reliability of MACD signals.