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Golden Cross About to Signal a Buy on S&P 500

Golden Cross About to Signal a Buy on S&P 500

By    |   Wednesday, 20 April 2016 11:47 AM


Few technical signals capture the public imagination. Most of the popular signals have ominous names like the Hindenburg Omen, the Titanic Syndrome or the Death Cross. As their names imply, those are all sell signals that dominate headlines when they occur despite their lackluster track records. Headline writers seem less impressed with long-term buy signals.
 
At the close on April 20, barring a market crash, a Golden Cross buy signal should be confirmed in the broad stock market. This signal occurs when the 50-day moving average (MA) crosses above the 200-day MA.
 
MAs are calculated to show a slowed version of the market’s trend. A 50-day MA can be used to identify the intermediate-term trend and the 200-day MA is widely used to call the direction of the long-term trend. When the intermediate-term trend turns from bearish to bullish we should expect a tradable gain of at least a few percent in the market.
 
The fact that this signal isn’t being widely publicized is itself a bullish sentiment indicator. Sentiment, the opinion of investors, is largely bearish and that provides a wall of worry for stocks to climb.
 
Overall, the weight of the evidence in the stock market is bullish. Until most of the bears throw in the towel, the market is likely to remain bullish. Since bears are among the most stubborn creatures in the market environment, we could see the bulls running on Wall Street for some time.

Michael Carr, CMT, is a subadviser to a mutual fund family and a chartered market technician.

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MichaelCarr
Few technical signals capture the public imagination. Most of the popular signals have ominous names like the Hindenburg Omen, the Titanic Syndrome or the Death Cross. As their names imply, those are all sell signals that dominate headlines when they occur despite their...
Golden Cross, buy, trade, invest
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2016-47-20
Wednesday, 20 April 2016 11:47 AM
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